Zoom Beats Earnings Forecasts, But Future Growth May Be Slowing

Zoom Beats Earnings Forecasts, But Future Growth May Be Slowing

The News: Zoom Video Communications reported its first quarter (Q1) fiscal year (FY) 2025 numbers, posting overall revenue of $1.14 billion, up 3.2% on a year-over-year (YoY) basis and up 3.5% in constant currency (CC). The company’s revenue figure narrowly beat the consensus analyst estimate of $1.13 billion, while topping earnings per share (EPS) estimates, posting a quarterly non-generally accepted accounting principles (non-GAAP) net income per share figure of $1.35 versus an expected figure of $1.19. The full report is available on Zoom’s Investor Relations page.

Zoom Beats Earnings Forecasts, But Future Growth May Be Slowing

Analyst Take: Zoom Video Communications posted Q1 FY 2025 revenue of $1.14 billion, up 3.2% YoY, and up 3.5% in CC, buoyed by strong enterprise sales revenue, declining churn within its online segment, and the expansion of its product suite. Although the company’s revenue growth is modest, the company is continuing to see success in new areas, such as its contact center as a service (CCaaS) offering, which attracted 90 new deals in the quarter with more than $100,000 in annual recurring revenue (ARR), reflecting a 246% YoY growth rate.

Here are the Zoom Q1 FY 2025 results by the numbers:

  • Q1 FY 2025 total revenue of $1.14 billion, up 3.2% YoY as reported and 3.5% in CC, beating the consensus estimate of $1.13 billion
  • Q1 FY 2025 enterprise revenue of $665.7 million, up 5.3% YoY
  • Q1 FY 2025 non-GAAP operating margin of 40.0%
  • Q1 FY 2025 operating cash flow of $588.2 million, up 40.6% YoY
  • Q1 FY 2025 online revenue of $475.5 million, flat YoY
  • Q1 FY 2025 non-GAAP net income per share was $1.35, up from $1.16 per share in Q1 FY 2024

Like many communications and collaboration vendors that saw strong growth during the pandemic, Zoom is trying to thwart a slowdown in growth by expanding the scope of its product offerings. The company’s Zoom Workplace collaboration platform was also launched during the quarter and is designed to provide a single platform to manage productivity, collaboration, engagement, and communication activities. In addition, the company has integrated Zoom AI Companion, its AI-based assistant, across six Zoom products very quickly, reflecting the company’s desire to create a better user experience throughout its platform.

These two elements are what CEO Eric Yuan believes are the key decision drivers behind the company’s increasing fortunes with enterprise customers, which Zoom defines as organizations that contribute in excess of $100K per year in revenue. The company noted on a conference call with analysts that it saw 8% YoY growth from this segment, with 3,883 customers, representing 30% of revenue, up from 29% in Q1 of FY 2024. Overall, enterprise revenue grew 5% YoY and represented 58% of total revenue, up from 57% a year ago.

To improve customer experience, the company transitioned 26,800 enterprise customers with low ARR to the online segment, which refers to customers that self-serve as opposed to being supported by Zoom’s direct sales team, resellers, or strategic customers. Furthermore, Zoom’s reported monthly churn in its online segment for Q1 FY 2024 decreased to 3.0%, showing an improvement of 40 basis points from the same quarter in the previous fiscal year, which is indicative of a positive trend in service continuity.

Strong Growth from Net New Customers

One of the surprises in the quarter, according to Yuan, was the contribution of net-new customers who have signed up from the company’s CCaaS offerings. Yuan thought that the offering would be most attractive to existing Zoom Meetings or Phone customers, but, in fact, CCaaS has served as a powerful entry point for new customers.

According to Yuan, quickly incorporating innovations into the platform has spurred strong adoption, along with solid channel performance. Indeed, Zoom highlighted several partnership deals, including those struck with Meta, Avaya, and Twilio, that are designed to provide additional reach into various markets and ensure that customers who aren’t using Zoom’s full suite of capabilities are still able to leverage the company’s collaboration technology, and generate new revenue.

Future Outlook and Guidance

Zoom said that its Q2 adjusted EPS will come in between $1.20 and $1.21, which is below the analyst consensus estimate of $1.23 per share. Similarly, the expected Q2 revenue range of $1.145 billion to $1.15 billion is also less than the analyst consensus estimate of $1.15 billion. According to Zoom, the second quarter (Q2) is expected to mark the low point of FY 2025, and revenue is expected to accelerate during the second half of the year.

For the full FY 2025, Zoom forecasts an adjusted EPS of $4.99 to $5.02, which is above the consensus estimate of $4.91. Meanwhile, revenue guidance for FY 2025 is set at $4.61 to $4.62 billion, aligning with the consensus of $4.61 billion.

Overall, Zoom seems to be taking the right path, balancing its focus across providing a full UCaaS/CCaaS offering against a more piecemeal approach that relies on partnerships to drive additional revenue and create new opportunities for expanding and deepening relationships with customers.

The company’s focus on embedding AI throughout its platform appears to be in line with many other vendors’ approaches and one that resonates with customers who don’t want to think about AI provisioning or choosing which workers, use cases, or license holders get AI and which ones don’t. Ultimately, despite the expected revenue dip in the next quarter, we expect Zoom to continue to grow, albeit modestly, as it continues to execute on its upmarket, enterprise-focused market strategy.

Disclosure: The Futurum Group is a research and advisory firm that engages or has engaged in research, analysis, and advisory services with many technology companies, including those mentioned in this article. The author does not hold any equity positions with any company mentioned in this article.

Analysis and opinions expressed herein are specific to the analyst individually and data and other information that might have been provided for validation, not those of The Futurum Group as a whole.

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Author Information

Daniel is the CEO of The Futurum Group. Living his life at the intersection of people and technology, Daniel works with the world’s largest technology brands exploring Digital Transformation and how it is influencing the enterprise.

From the leading edge of AI to global technology policy, Daniel makes the connections between business, people and tech that are required for companies to benefit most from their technology investments. Daniel is a top 5 globally ranked industry analyst and his ideas are regularly cited or shared in television appearances by CNBC, Bloomberg, Wall Street Journal and hundreds of other sites around the world.

A 7x Best-Selling Author including his most recent book “Human/Machine.” Daniel is also a Forbes and MarketWatch (Dow Jones) contributor.

An MBA and Former Graduate Adjunct Faculty, Daniel is an Austin Texas transplant after 40 years in Chicago. His speaking takes him around the world each year as he shares his vision of the role technology will play in our future.

Keith has over 25 years of experience in research, marketing, and consulting-based fields.

He has authored in-depth reports and market forecast studies covering artificial intelligence, biometrics, data analytics, robotics, high performance computing, and quantum computing, with a specific focus on the use of these technologies within large enterprise organizations and SMBs. He has also established strong working relationships with the international technology vendor community and is a frequent speaker at industry conferences and events.

In his career as a financial and technology journalist he has written for national and trade publications, including BusinessWeek,, Investment Dealers’ Digest, The Red Herring, The Communications of the ACM, and Mobile Computing & Communications, among others.

He is a member of the Association of Independent Information Professionals (AIIP).

Keith holds dual Bachelor of Arts degrees in Magazine Journalism and Sociology from Syracuse University.


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