How Zoom Makes Money

Zoom generates most of its revenue from customers in the Americas

Zoom Video Communications Inc. offers a secure, intelligent collaboration platform to streamline the work efforts of people around the world and to fulfill its mission of “limitless human connection.”

The source of its greatest amount of revenue is the subscriptions it sells to customers in the Americas.

Zoom connects people via video, phone, chat, and content sharing. Its platform can be accessed by a range of devices. Meetings on the platform can host as many as 1,000 participants while webinars can scale up to as many as 50,000.

In 2024, Zoom increased its focus on and investment in AI. It remains committed to the responsible development of AI and never employs audio, video, chat, screen sharing, or attachments related to any customer to train Zoom’s or third-party AI models.

Key Takeaways

• Zoom sells subscriptions to its collaboration platform to individuals and businesses.
• Revenue is derived from the number of customers plus purchases of products such as Zoom Phone, Zoom Spaces, Zoom Events, Zoom Contact Center and Zoom Revenue Accelerator.
• The vast majority of the company’s customers are based in the Americas.
• One of Zoom’s growth goals is to increase the number of customers contributing more than $100,000 in revenue annually to continue to build its revenue stream.
• In 2024, Zoom continued its focus and investing in AI.

Zoom’s Industry

Zoom (ZM) operates in the Software-Application industry within the Technology sector.

Zoom’s subscription revenue is derived from the number of customers subscribing to its variety of subscription plans plus purchases of its various products. Customers can be a single individual, an organization, or business. Products include Zoom Phone, Zoom Spaces, Zoom Events, Zoom Contact Center and Zoom Revenue Accelerator.

The company’s generative AI efforts will play a key role in the innovation branch of its growth strategy.

Zoom earns high scores from customer review sites such as Gartner Peer Insights, TrustRadius, and G2 and recognition for its leadership in its industry.

Competition

• The market in which Zoom operates includes legacy web-based meeting service providers such as Cisco Systems Inc.’s (CSCO) WebEx and GoTo.
• Other competition includes bundled productivity solution providers with video functionality such as Alphabet Inc.’s (GOOGL) Google Workspace and Microsoft Inc.’s (MSFT) Microsoft Teams.
• Unified communications as a service (UCaaS) and legacy PBX providers such as 8×8 Inc. (EGHT), Avaya, and RingCentral Inc. (RNG) are also rivals.
• Zoom also competes with consumer platforms offered by Amazon (AMZN), Apple (AAPL), and Facebook (META).

What’s more, Zoom’s business faces pressure from the ongoing effects of the Russian invasion of Ukraine and the conflict in Israel. For fiscal year 2024, its customers in these regions represented approximately 1% of our net assets and total consolidated revenue.

Note

According to Zoom CEO Eric Yuan, AI-driven innovations powered an operating cash flow growth of 40.6% and free cash flow growth of 43.6% year over year, as of the first quarter of fiscal year 2025.

Zoom’s Financials

As of May 2024, Zoom’s market capitalization was $19.82 billion.

Zooms’ 2024 annual report provided the company’s financial results for the 2024 fiscal year (FY) which ended on January 31, 2024. Additionally, on May 20, 2024, the company announced financial results for the first quarter of 2025, ended April 30, 2024.

Revenue

For FY 2024, revenue was $4.52 billion, an increase of 3% over the previous year’s $4.39 billion. For the first quarter of FY 2025, revenue was $1.14 billion, an increase of 3.2% over the previous year’s first quarter.

Operating Income

For FY 2024, operating income was $525.27 million, an increase of 114% over the previous year’s $245.42 million. For the first quarter of FY 2025, operating income was $203.02 million, an increase of almost 2000% over the previous year’s first quarter.

Net Income

For FY 2024, net income was $637.46 million, a increase from the previous year’s $103.71 million. For the first quarter of FY 2025, net income was 216.30 million, an increase from the previous year’s first quarter of $15.44 million.

Revenue From Geographical Regions

Zoom operates as a single business segment; however, it breaks down its revenue into three broad geographical regions: Americas; Asia Pacific (APAC); and Europe, Middle East, and Africa (EMEA).

The attribution of revenue to a region depends on the billing address of the customer. Zoom does not break out the profits generated by each region.

The Americas is Zoom’s biggest region by revenue, followed by Europe, Middle East, and Africa, and then Asia Pacific.

Americas

The Americas generated $3.22 billion in revenue for FY 2024, a gain of 5.7% year-over-year. The region accounts for 71.3% of revenue.

Asia Pacific

The Asia Pacific region generated $571.59 million in revenue for FY 2024, down 3.2% year-over-year. The region accounts for 12.6% of revenue.

Europe, Middle East, and Africa

The Europe, Middle East, and Africa region generated $726.71 million in revenue for FY 2024, down 2.8% year-over-year. The region accounts for 16.1% of revenue.

History and Leadership

Zoom was founded in 2011 by Eric Yuan. It is headquartered in San Jose, Calif.

A small company at the start, CEO Yuan led its growth and development to its successful initial public offering (IPO) in 2019.

Before he established Zoom, Yuan worked at Cisco as the corporate vice president of engineering. There he drove Cisco’s collaboration software development. He was also a founding engineer and vice president of engineering at Webex.

Yuan also serves on Zoom’s board of directors.

Recent Developments

• In April 2024, Zoom launched Zoom Workplace, its AI-powered collaboration platform. It’s designed to streamline communications, boost employee engagement, optimize employee time, and improve levels of productivity. According to the company’s chief product officer, the new platform “delivers an AI-powered experience that fuels productivity and collaboration to help teams make the most of their time.”

• In March 2024, Zoom announced a strategic partnership with Avaya that involves Avaya integrating Zoom’s AI-driven platform Workplace for meetings, team chat, scheduling, whiteboarding, spaces, and more with its own Communication & Collaboration Suite.

• In June 2023, Zoom launched certain key features in Zoom IQ, which is a smart companion that “empowers collaboration and unlocks people’s potential through generative AI.” This use of AI will “help teams improve productivity, balance workday priorities, and collaborate more effectively.” Zoom seeks to remain competitive by incorporating generative AI into its product offerings.

What’s the Value of a Share of Zoom Stock?

On May 22, 2024, a share of Zoom was trading at $64.76.

Does Zoom Do More Than Video Conferencing Now?

Yes. While it started as a simple video conferencing company, Zoom has ventured into streamlined online communications and enhanced productivity across different devices. It offers meetings, team chat, phone, mail, a calendar, a scheduler, whiteboards, sharing, spaces, and more.

When Did Zoom Go Public?

Zoom had its initial public offering in 2019. It was one of the most successful IPOs of that year.

The Bottom Line

Zoom is a software technology company founded in 2011 that offers a comprehensive selection of online communications and collaboration tools to individuals and businesses. Its revenue comes primarily from subscriptions in the geographic regions of the Americas, APAC, and EMEA. Of these, the Americas provide the largest percentage.

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