Summary
Zoom Video Communications posted $1,050.8 million of revenue in the third quarter of fiscal 2022, up 35% from the prior-year quarter. GAAP gross profit was $779.8 million, up 50.4%, and gross margin rose to 74.2% from 66.7%. GAAP operating income reached $290.9 million, up 51.3% from $192.2 million, while operating margin improved to 27.7% from 24.7%. Net income was $340.4 million, up 71.4% from $198.6 million, and diluted EPS rose to $1.11 from $0.66.
Operational momentum came from larger customers. Zoom ended the quarter with 2,507 customers contributing more than $100,000 in trailing 12 months revenue, up approximately 94% from the same quarter last fiscal year. Customers with more than 10 employees totaled approximately 512,100, up approximately 18%. The trailing 12-month net dollar expansion rate for customers with more than 10 employees stayed above 130% for the 14th consecutive quarter.
Product work remains central to the story. Zoom Phone reached availability in 46 countries and territories as of October 31, 2021. The company introduced Zoom Events in July 2021 and announced Zoom Events Conference in September 2021. An end-to-end encryption option is available to free and paid customers globally for meetings with up to 200 participants. Management also points to Zoom Apps, which became generally available in July 2021, as a way to bring third-party applications into meetings.
The backlog and cash generation remain sizable, though some quarterly cash metrics slipped. Deferred revenue was $1.16 billion, up 39.0% from the prior-year quarter. Remaining performance obligations were $2.46 billion, up 50.6%. Operating cash flow was $394.6 million in the quarter, down 4.1% from $411.5 million, while capital expenditures were $19.8 million, down 15.0% from $23.3 million. Free cash flow, a non-GAAP measure, was $374.8 million, compared with $388.2 million. For the first nine months of fiscal 2022, revenue was $3.03 billion, up 71.2%. Gross profit was $2.23 billion, up 83.8%, with gross margin rose to 73.7% from 68.6%. Operating income was $811.8 million, up 101.1%, and operating margin rose to 26.8% from 22.8%. Net income was $885.0 million, up 115.0%, and diluted EPS rose to $2.89 from $1.38. Operating cash flow for the nine months was $1.40 billion, up 30.2%.
Guidance for the fourth quarter of fiscal 2022 calls for total revenue of $1.051 billion to $1.053 billion and non-GAAP income from operations of $361.0 million to $363.0 million. Non-GAAP diluted EPS is expected to be $1.06 to $1.07 on approximately 307 million non-GAAP weighted average shares. For the full fiscal year 2022, total revenue is expected to be $4.079 billion to $4.081 billion, non-GAAP income from operations is expected to be $1.598 billion to $1.600 billion, and non-GAAP diluted EPS is expected to be $4.84 to $4.85 on approximately 306 million non-GAAP weighted average shares. The company says the full-year revenue target represents approximately 54% year-over-year growth.
Risks sit mostly around the durability of pandemic-era demand and the cost of supporting free usage. Zoom warns that the tapering of COVID-19, especially as vaccines become widely available and distributed, may reduce paid hosts and users once people return to work or school. Free Basic accounts and the removal of the 40-minute limit for more than 125,000 K-12 domains generate no revenue but require added network, data storage, and processing capacity. That dynamic has hurt and may continue to hurt gross margin. The company also cites competition from other communications platform providers, delays or outages at co-located data centers, and failures in internet infrastructure or broadband interference that could make users question reliability. Management expects research and development, sales and marketing, and general and administrative expenses to increase in absolute dollars and as a percentage of revenue for the rest of the current fiscal year.
Forecast
Reported figures
GAAP, from SEC filings| Metric | Q3 FY2022 | Q2 FY2022 | QoQ | Q3 FY2021 | YoY |
|---|---|---|---|---|---|
| Revenue | $1.05B | $1.02B | +2.9% | $777.2M | +35.2% |
| Gross profit | $779.8M | $760.2M | +2.6% | $518.5M | +50.4% |
| Gross margin | 74.2% | 74.4% | -0.2 pp | 66.7% | +7.5 pp |
| Research & development | $98.5M | $82.3M | +19.7% | $42.6M | +131.3% |
| Sales & marketing | $293.7M | $271.2M | +8.3% | $190.2M | +54.5% |
| General & administrative | $96.7M | $112.1M | -13.7% | $93.5M | +3.5% |
| Total operating expenses | $488.9M | $465.6M | +5.0% | $326.2M | +49.9% |
| Operating income (loss) | $290.9M | $294.6M | -1.3% | $192.2M | +51.3% |
| Operating margin | 27.7% | 28.8% | -1.2 pp | 24.7% | +2.9 pp |
| Net income (loss) | $340.4M | $317.1M | +7.3% | $198.6M | +71.4% |
| Net margin | 32.4% | 31.0% | +1.4 pp | 25.6% | +6.8 pp |
| Diluted EPS | $1.11 | $1.04 | +$0.07 | $0.66 | +$0.45 |
| Customers | 433,700 | 370,200 | +17.2% | 74,100 | +485.3% |
Risks
The filing warns that user growth and paid host demand may slow or decline once the COVID-19 pandemic tapers, as vaccines become widely available and users return to work or school. It also notes that a significant portion of increased usage is from free Basic accounts and removed K-12 time limits that generate no revenue, which has adversely affected and may continue to affect gross margin.
Zoom expects competition to intensify from Microsoft Teams, Google Meet, Cisco Webex, LogMeIn GoToMeeting, UCaaS providers, and consumer platforms, some of which can bundle broader products, offer lower-priced or free alternatives, and use greater resources to acquire customers. The risk factor says pricing pressure could force price cuts or higher marketing spend.
The subscription business depends on attracting new customers, renewing existing subscriptions, upselling products, and upgrading free hosts to paid plans. The COVID-19-driven shift in customer mix toward consumers and small and medium-sized businesses could result in higher non-renewal rates, and a majority of free hosts may never upgrade to a paid Zoom Meeting plan.
Zoom depends on co-located data centers and public cloud providers including AWS and Oracle Cloud, and the filing says damage, failure, capacity constraints, server part shortages, or delayed new data centers could cause service interruptions, credits or penalties, and customer loss. It notes past partial outages and increased usage during the COVID-19 pandemic.
Security vulnerabilities and incidents have occurred in the past and may occur again, and expanded use by first-time COVID-19 users led to negative publicity over meeting disruptions, encryption, and privacy. The filing says vulnerabilities may be unremediated or customers may fail to install updates, and this could lead to regulatory investigations, litigation, and loss of customer confidence.
Zoom's China operations and data handling have drawn U.S. Department of Justice subpoenas from the EDNY and NDCA seeking information about interactions with foreign governments, user data storage and access, and Tiananmen commemorations on Zoom. The Chinese government previously suspended Zoom service in China, and ongoing investigations could lead to fines, penalties, and reputational harm.
Zoom is investing more in sales to large organizations, which typically have longer evaluation and negotiation cycles and may demand additional features, support, pricing concessions, and security controls. This can raise up-front sales costs and increase unpredictability in results.
International expansion subjects Zoom to multiple legal and regulatory systems, data protection and telecommunications requirements, anti-corruption and trade laws, tax risks, and employee retention challenges. APAC and EMEA represented 33% of revenue for the nine months ended October 31, 2021, and planned R&D expansion in Phoenix, Pittsburgh, Singapore, and India could increase operating expenses.
Headcount grew from 3,871 full-time employees as of October 31, 2020 to 6,269 as of October 31, 2021, straining management and culture. Zoom cites intense competition for software developers and sales personnel, and vaccine mandates or reopening plans could result in attrition and recruiting difficulties.
Zoom holds strategic investments in public and private companies and records fair value adjustments through the statement of operations. Gains on strategic investments, net were $122.4 million for FY2022 Q3 and $154.5 million year to date, and changes in market prices or impairments could cause significant earnings volatility.
Zoom and certain officers and directors were sued in putative class action and shareholder derivative lawsuits in April 2020, June 2020, and October 2021 alleging violations of federal securities laws for statements about data privacy and security. Securities litigation could result in substantial costs and divert management attention.
Zoom recognizes subscription revenue over the subscription term, so a decline in new or renewed subscriptions may not immediately affect current quarter revenue but will hurt future periods. Deferred revenue was $1.16 billion at October 31, 2021, up 39.0% versus the prior-year quarter, and RPO was $2.46 billion, up 50.6%.
SaaS KPIs
All quarters →Non-GAAP Operating Margin
Free Cash Flow
Customers with More Than 10 Employees
Customers Contributing More Than $100,000 in TTM Revenue
Summary, forecast, risks and KPIs are extracted from Zoom Communications, Inc.'s SEC filings for Q3 FY2022 (10-Q / 10-K and the 8-K earnings release); GAAP figures in the summary are checked against the reported XBRL data. They can contain errors; the filings are authoritative. Processed Oct 6, 2026.