Zoom’s brand recognition paved the way for a land-and-expand growth strategy that is gaining momentum. (Tiffany Hagler-Geard/Bloomberg)
Zoom Video Communications (Nasdaq: ZM) delivered triple-digit revenue growth (year over year) for several quarters following the onset of the pandemic, but growth decelerated sharply over the past year, and shares were recently down 68% from their 52-week high.
But don’t count out Zoom. It divides its customers into two groups – online customers and enterprise (business) customers. While the number of online customers exploded during the pandemic, they haven’t all stuck around. So Zoom shifted its focus to enterprise customers, a group that’s easier to retain and is more open to upselling. Enterprise customer numbers grew 18% year over year in the second quarter, while revenue from enterprise customers rose 27%.
Zoom’s brand recognition paved the way for a land-and-expand growth strategy that is gaining momentum. Zoom Phone surpassed 4 million seats in August, up 100% over the past year, and two newer products look promising: Zoom Contact Center is an omnichannel customer service solution, and Zoom IQ for Sales is AI-powered software that analyzes conversations in Zoom Meetings to help sales teams work more productively.
Zoom isn’t a buy-it-and-forget-it kind of stock, but it has multiple ways to fuel growth, and long-term investors should take a closer look. (The Motley Fool owns shares of and has recommended Zoom Video Communications.)