Zoom is a clear market leader in the video communications industry. It provides video and audio conferencing solutions across mobile, desktop, and telephone systems. While the company is arguably the largest beneficiary from COVID and remote work, as we come out of the pandemic, questions arise around the sustainability and churn of the COVID cohort and the company's long-term growth potential.

In the recent earnings report, the company reported a solid quarter with total revenue of $1,021M (54% Y/Y growth) vs. $ 990M consensus (3% beat). Non-GAAP EPS of $1.36 vs. consensus $1.16 (17% beat).

Zoom Revenue Growth ($M)

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Zoom Revenue Growth ($M)

Revenue growth mostly comes from new customers with a focus on the enterprise segment. Net dollar retention rate sustained at >130% as increased churn from small businesses and individuals partially offset by the enterprise demand. Despite the solid results, shared traded down 12% in the aftermarket due to flat full-year guidance in Q3 and Q4. The management raised FY top-line guidance by 1%, suggesting a significant revenue deceleration to ~16% in Q4. The company expects to see a churn increase for faster-than-expected reopening. 

Zoom Phone Customer Counts

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Zoom Phone Customer Counts

With that being said, we do see impressive tractions from Zoom Phone and excellent momentum with large customers. We reckon that Zoom is transitioning into a broader platform with some near-term headwinds. In the long run, it remains to be one of the best communications platform solutions.