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Zoom earnings were ‘much better than everyone feared’: Analyst

Mizuho Managing Director Siti Panigrahi checks out Zoom's Q1 earnings, sustaining subscriber growth, and the communications technology company's business outlook.

Video transcript


- Zoom shares are surging after hours after the company beat on earnings during their most recent quarter, also raising its full-year guidance. We want to bring in Siti Panigrahi-- he's Mizuho's managing director-- here to break some of these reports down for us. I guess a strong beat here from Zoom. We know the company has been under a tremendous amount of pressure over the last 18 months or so. What did you make of this most recent report?

SITI PANIGRAHI: Yeah, it's good to be here. First of all, looking at the number, definitely it's much better than what everyone feared. Mostly, if you think of Zoom coming out of the pandemic with the significant growth last two years, now everybody is worried about growth now with business reopening. So this number-- definitely the number, Q1 number across the board, and even Q2 guidance also, better than expected slightly.

And if you look at the fiscal '23 guidance also, they reiterated revenue number. But there is EPS and margin, which is-- I think was expected. I heard from investors, even some of them were expecting the numbers would be down given the current environment. So reiterating top line and raising bottom line is definitely positive. That's why you're seeing stocks reacting positively.

- So Siti, during the first quarter, they launched the Zoom Contact Center. They launched the Zoom Whiteboard, Zoom IQ for sales. What's the opportunity there in those three divisions? I guess, how much will that aid the company in returning to some of the growth that we saw in the midst of the pandemic?

SITI PANIGRAHI: Yeah, that's a great point. Look, after coming out of pandemic, they have a huge install base. The question is how they're going to monetize their install base by only introducing different layers of products so that they can cross-sell. So immediately, what you look at is the Zoom phone that they can cross-sell to the base. We'll hear more today on the call how the phone is cross-selling.

Phone-- 3 million units phone, that's definitely a good number to start with. And then we'll see more contact center uptake next year. That's another layer of growth you'll start seeing. So this year, more it's phone, Zoom rooms, and events that you'll see. Next year, contact center growth.

And that's how they can monetize that. And that's what everybody is trying to look at. What is the enterprise adoption? And what's very interesting-- I was getting to the [INAUDIBLE] enterprise revenue segment grew 31% year over year. That's a pretty good number considering this is a bigger annual quarter.

- Siti, is it going to be enough, though, to convince the Street and to convince investors to buy this stock? Because I think one of the arguments out there is that the growth that we saw during the pandemic-- if you're not on Zoom, if your company doesn't use Zoom, if you personally don't use Zoom, you're not very likely to add it over the next couple of years. What do you say to that argument?

SITI PANIGRAHI: Yes, I mean, you have a point in terms of when you think of adding new users. At this point, I think everybody's looking at the cross-selling to the install base. Whatever you have right now, number of users now, how can you-- everybody has phone now. How can you push phone, contact center, and other products that they can bring in potentially so that they can monetize the best?

I agree. I mean, it's not about now adding more users. It's more about cross-selling to the base. And the other segment-- what everybody is really concerned about is the online segment. That is where you'll see more churn. But company thinks those who are 15 months and above, those cohorts should stabilize. So it's more at this point for investors, what is the normalized growth for Zoom coming off of pandemic?

- And Siti, I'm guessing that that's one of the things you want to hear from the CEO in the earnings call that will get underway soon. But what else do you want to hear from Eric Yuan when he does do the earnings call?

- I think the point is that, what are the products you're seeing in the near-term and mid-term growth that's going to drive? Second is the potential for enterprise segment, how fast they can grow further into the base. Right now, enterprise segment growth is pretty good. But also, where do you see more potential even to drive penetration within the base?

And the third one you want to see is when do we expect online segment to stabilize. I think that's one of the areas that we're really concerned. I heard it might decline because of that segment. So that's one of the areas we want to hear from the company.

- Well, again, Zoom shares up just around 16% right now after hours. Siti Panigrahi, Mizuho's managing director, thanks so much for joining us.

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