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Zoom: The sound of web chat biz's annual profits nosediving

Fiscal 2023 'not without its challenges' as bottom line tumbles 76%

Zoom, poster child of pandemic web comms, is experiencing the same readjustment as other online tech providers whose businesses ballooned in recent years, but is still managing to pick up more paying customers.

For its Q4 of fiscal 2023 ended January 31, Zoom reported revenue of $1.1178 billion, up 4 percent year-on-year. For the entire year, Zoom reported revenue up 7 percent to $4.393 billion, compared to 326 percent growth in its fiscal 2021 and 55 percent in 2022.

The Enterprise division hauled in $636 million of revenue, itself up 28 percent. The slowdown came from the Online division, down 10 percent to $481.7 million.

"FY23 was not without its challenges," said CEO Eric Yuan on an earnings call with analysts. "We experienced headwinds in terms of currency impact, online contraction, and deal scrutiny which continued into Q4."

Just weeks ago, Zoom joined the brigade of tech companies beating the redundancy drum, and confirmed it was chopping 15 percent of its workforce. The exec said last night that this was a "tough but necessary decision."

The vid chat biz – like Google, Microsoft and many others – recruited heavily in the past couple of years, growing headcount to 6,787 in 2022, up more than 50 percent in a year. Unlike those cloud giants, however, Zoom isn't exactly rolling in profits.

Zoom has tried to diversify beyond web video since its popularity soared in 2020, bulking out a collaboration suite to include Meetings, Team Chat, Phone, Events, Rooms and more. It also has Contact Center and VoIP services.

CFO Kelly Steckelberg said Zoom expects the proportion of sales to businesses to ramp over time, with the number of Enterprise punters growing 12 percent year-on-year to 213,000 in 2023.

"We ended the quarter with 3,471 customers contributing more than $100,000 in trailing 12 months revenue," she said. These equated to 28 percent of revenue, up from 23 percent.

Total operating expenses for the year jumped to $953 million, from $562 million, which means Zoom recorded an operating loss of $130 million versus an operating profit of $252 million a year earlier.

For its Q4, Zoom posted a net loss of $104 million versus a profit of $490.5 million a year earlier. For fiscal 2023, net profit came in at $245.4 million versus $1.063 billion, down 76 percent.

Amid grand plans to "redefine teamwork through offering new immersive experiences that improve employee engagement", "embedding AI into more workflows" and tailoring services for customers, the CEO said Zoom expects to grow revenues by 1-2 percent in constant currency in its latest year.

All this is a far cry from the trading output in recent times, but that's the state of the tech industry in 2023. ®

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