ZM: On Growth Slowing Down

ZM: On Growth Slowing Down

I made an interesting observation recently. When we talk about growth slowing down for a company because the year-over-year percentage is down, we are missing something important. The actual dollar growth isn’t slowing at all. Take Zoom for instance. People talk about its growth slowing, but let’s take a look:

The last 10 quarters revenues in millions of dollars have been: (listed sequentially)
27 33 41 51 60 75 90 106 122 146

Yes, the year-over-year percentage of increase is slowing. But look at the dollars!!! The sequential increases from one quarter to the next were:

$6 million
$8 million
$10 million
$9 million
$15 million
$15 million
$16 million
$16 million
$24 million

People got upset because its rate of increase came down. However the dollar increases each quarter over the next keep rising. Last quarter’s dollar increase was four times what it had been just eight quarters before. And not only that, its dollar increase in revenue of $24 million jumped by 50% SEQUENTIALLY(!) over its previous high gain of $16 million. What more could anyone have asked for?




Saul, thanks for that. Really impressive sequential growth.

I wrote this at beginning of September but never posted it. I hope it’s provocative to a good discussion.

Time to shake things up a bit here. The high flyer showcase showdown.

Why I would prefer to own Zoom over Crowdstrike.

Growth. Both fantastic. CRWD 94% at $108M and ZM at 96% at $146M. Zoom growing faster at a 35% higher revenue run rate. CRWD fantastic. ZM fantastic-er.

Zoom is profitable and has been for a year or so. And still achieving all that growth. CRWD is on a path to profitability but has a ways to go.

Management. I give plus a million to Zoom. Yuan is the type of humble concerned and capable leader that never misses a thing and will respond much quicker to challenges. The Crowd team acts entitled and bordering on arrogant(though they do have the facts on their side). This type of management team has the tendency to get blindsided by threats.

Disruptiness. Endpoint security has been around for a long time. It has been a necessity, any established company has a solution. Today’s endpoints are secured one way or the other. Crowd’s prospects are to displace legacy solutions or to secure new businesses that start up or new endpoints that are purchased. There is no new market or new place for endpoint for Crowd to win. It’s a known market. Ok maybe IoT has some untapped land?

Zoom I argue is in a very much untapped field. There is legacy solutions. Most were adopted long ago and tucked away and forgotten about. Never fully implemented in most businesses because the systems were not worthy. Many companies may not even have a video communication solution at all. That will not be the case 5 years from now and Zoom will be the change. It is this unknown of an immature market, like with Roku and TTD, where longer term hyper growth can thrive. I mean HSBC putting down 290,000 hosts and 5,500 Zoom conference rooms. That is a shift in enterprise communication strategy, and everybody will be doing it and most have not. Then there is the smaller opportunities that abound with the first truly effective video communication platform. That of healthcare and education and expanding your freaking yoga class in Ohio to someone in New Zealand. YouTube was disruptive in bringing video to mass audience, and Zoom is the next logical step to that which is virtualizing presence in real time. Look at video over the last five years and ask yourself where will it be in 10 years. Much more ubiquitous to personal and business life. Now Endpoint over last five years and Endpoint in 10. More Cloudy?

For Endpoint Security Cloud native may not always be the best solution. There are many cases and many end points where a connection to the host is not possible. The strength of the Crowd platform is the lightweight agent installed on the end point that doesn’t take up much resource and it communicates with the mother ship in the cloud to identify problems. Cloud is not always appropriate and therefore Crowd’s addressable market will never converge to 100% of the market, which it doesn’t have to be an outstanding investment. ZScaler has the same challenge. It’s not always the best solution all the time because it is cloud. But cloud native is typically the beat solution for the broadest number of use cases.

Video communication on the other hand will 100% benefit from cloud native. You will not be able to communicate via video with anybody without connecting to the internet.

Finally, the companion Zoom phone product has potential to be just as big and deployed as a unified solution for next gen communication. It’s an easy add on that basically just falls right to the bottom line.

Recap. Zoom has higher growth, higher revenue, doing so profitably, higher CAP, better leadership, will likely capture more of the market share, and operates in a huge unknown because its never been done before.

And Crowd is an incredibly strong company with an incredibly strong product. They deserve glory as well. And maybe even a place in the portfolio.

In the end I like Zoom just a bit better.

*Back to present. Values for both have come down. CRWD is very compelling at the current valuation, it has suffered more, and I believe it is because of the differences I described. Zoom is also much more compelling. I sold ZM shortly after writing this and am now back in. (I keep doing this, it’s just the valuation seemed so crazy earlier).



What more could anyone have asked for?



Eggs in my beer.


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I know of Zoom, I agree with what Darth is saying on Zoom, and for once there may be the degree of risk tolerance valuation wise I want in any investment. And I do like absurdly over valued like SHOP, just not eating up the future valuations.

On current Yahoo! estimates 28x revenue on this year’s revenues. Boo :unamused:! But wait, grow 80% in 2021 and your at 15x revs. Yay :hugs:!

Why? Because one year out it is nearly provincially valued. Meaning despite it all {I don’t know their 2021 growth rate. 80, 70, 60% but either will do and should remain long term hypergrowth}.

We are looking at an absolute disruptive world changing powerhouse valued 1 year out. Depending on expected growth rate for next year, 1 year from now, and what revenues actually come out this year, we are 1 to maybe 1.5 years ahead of ourselves, and 2 to 2.5 years will be behind ourselves.

That appears possibly opportune for such a company.

Please correct me if I may be too optimistic here. This is a world changing business.



Please correct me if I may be too optimistic here. This is a world changing business.


I work at a fortune 500 IT VAR/SI.
Many meetings throughout a week with clients.
Skype, WebEx, and now Teams. No Zoom.

Only Zoom I can recall is a vendor…forget which one.

Not a single client complained we weren’t using Zoom. Not a single client was unable to hear us or see presentations. None use video.

I may be in a world of older-school types that don’t care to see each other on a screen. maybe it is a midwest thing and all the cool kids are in CA or something.

It is video conferencing. My kids use google Hangouts all the time. Apple peeps use FaceTime all the time. I don’t see what is world-changing about Zoom.

Growth is awesome…metrics are awesome…but the idea you just ignore valuation has proven to be completely false since July 26th. Only reason I am up over 40% YTD in my port is because I did trade out of some names that seemed absurdly high and/or just never got into them in the first place.

You make bank on AYX/MDB/TTD and others when they are sub-$3/4b mkt caps and growing 50%+ y/y while having multiples closer to 15 or under. Share price gains were aided by both actual growth and multiple expansion.

When you start out of the gate at $10b+ mkt cap and P/S north of 30/40/60, why does anyone waste so much time trying to rationalize how “world changing” the tech is when the actual stock investment / CAGR seems limited at best due to said valuation?



Follow up on guidance for next quarter.

Turning to guidance for Q3.

CRWD has guidance of $119.5M at top. They beat Q2 company guidance by $4M at the top. $124M gives them 87% growth from $66.4M.

ZM has guidance of $156M at the top. They beat Q2 company guidance by $16M at the top. $171M gives them 90% growth from $90.1M

Maybe they don’t have an HSBC level deployment in the works. Maybe they have several?


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When I retired (2010) from a very big firm Webex + conference call was the standard for remote meetings. The growth of remote meetings had been very rapid. Near the end of my tenure I attended twice weekly meetings with a team in the UK while the team I was on was located on the west coast of the US. Even a few years prior this would not have been possible. Meetings of geographically dispersed teams involved travel and were far less frequent. For those unfamiliar with Webex (and similar) it provided for sharing the desktop display on ones PC. No live video was involved. However, if you displayed a video on your PC it could be shared. I don’t recall ever attending a meeting when this was done. Primary displays were static PowerPoint, spreadsheets and text documents. But really if you could display it on a PC, you share it over Webex. Seemed adequate at the time. There was no real time interaction, what I mean by that is I couldn’t directly edit someone else’s document during a meeting.

I recall that some of our IT researchy guys demoed a video sharing capability (in-house or new product? I don’t recall). They were hyped. Four video streams (all inside the same building) could be displayed split screen or one dominant and three thumbnails. I couldn’t think of more than a few cases where it would be really useful. Like displaying a manufacturing interference problem on the factory floor to remote design, manufacturing and tooling engineers simultaneously. A few other use cases came to mind. None of them were standard meetings. And the video sharing capability (at the time) was really crappy at displaying a desktop. You had all those weird distortions you are prone to get when taking a video of a screen display. I have no idea if Zoom has a way of sharing desktops or if it is video only. That would be something worth looking into IMO.

All that being said. I have little doubt that Zoom has a very big TAM. There are a lot of meetings where face-to-face, live dialog and body language are of primary importance. White board and easel displays are still a common practice. They are ideally suited to video. Remote health care seems ideally suited to Zoom capabilities. I’m long Zoom, but maybe my confidence level is not as high as some.

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I don’t feel the need to be cheerleading for Zoom, although I do own the stock; but I have followed along, reading all the anecdotal stories and testimonials of message board members sharing their experiences on the board and most all have been about office/work meetings. Couldn’t the Zoom experience or market also cover:

  • Guest Speakers at conferences participating via Zoom, like I did at a recent Motley Fool event where Eric Yuan was the guest speaker,…you can finally get Oprah Winfrey as your high school commencement speaker coming to you live from her couch

  • Remote classroom delivery of real time educational content and real time student participation

  • Teladoc; video interaction of healthcare related episodic care increasing the patient touch point of a simple phone call,

  • customer service; Zooming with a customer service rep that demonstrates to me how to solve the issue I am having with a product or service

  • legal profession for taking depositions,

  • not to mention as we are seeing today, the packaging of Cloud based companies to provide a stack of enterprise services

Like so many other companies that start out in one lane and then evolve or pivot to a new lane or additional lanes; couldn’t Zoom end up casting a much broader net


Not all of these use cases require the same capability. E.g., the computer support family mostly involves taking over the customer’s desktop … and only rarely wanting video from the customer’s camera so that the customer can show you the funny thing that is happening with the printer. Teamviewer is superb at this.

Yes, Zoom does screen sharing and live markup of things on screen and everyone of those that hmc describes. Not sure of the legal deposition one, but the rest they do.

Some observations on Zoom…

I work at a Fortune 50 company, and currently interact on a daily basis with two Top 10 SI firms and a Top 5 Software Firm. All of the organizations are using Microsoft products - One of the SI’s and us are migrating from Skype to Teams in a rapid fashion, the other two are still Skype based, but will be coming. I have yet to use Zoom in a work setting. However, I would also assume that my company is part of the 58% of the Fortune 500 on their customer list, as somewhere in the organization someone is paying for a workgroup to use it.

That said, I also have used Zoom (and own the stock). The Zoom use has been with independent professionals, and seems much easier to enable video conferencing.

I am currently on a project with the team split between the UK and US (plus off-shore in India), and use Video Conferencing on a daily basis (primarily legacy Polycom units, which are now being integrated with our Teams infrastructure). Polycom is currently easier to get rooms (and individuals) connected on a video conference basis. Teams is still being used more as a Webex replacement (voice plus screen sharing), but trying to use it for more.

I haven’t had a phone at my desk for the past two years (or even used my direct phone line, which I could use via software on the laptop). I prefer to use the laptop over the mobile phone for most conference calls.

The environment is rapidly changing in this space, and Zoom is likely well positioned. But they will need to fight a battle against the Microsoft’s (Teams, Skype) and Cisco (WebEx) of the world. Within our organization, the Network / Telecomm group favored Cisco, and full Skype (desktop sharing, voice) was slow to rollout as Webex and Jabber (softphone software) were the preferences.

I think one of the advantages that Zoom has is the ease of implementation - that workgroup somewhere in my organization could have expanded rapidly to the entire organization if the right person was exposed to it and wanted to champion it (preventing this now is a strategic partnership with Microsoft which would be tough to topple at this stage).



Positive revenue growth dictates an increase in revenue dollars. If the $-revenue was falling, there’d be no growth.

The fear is with slowing growth that firms like ZM won’t achieve escape velocity of growing margins, profitability and market dominance.

My company bought into the whole Skype for Business thing 2-3 years ago. Conference rooms were setup with the required hardware: large UHD screens, touch-pad controllers, mics and speakers. Its integration with Outlook is very good. I can schedule a meeting for multiple geographies, invite the people, and include all necessary rooms. Outlook knows if all the people and all the rooms are available. Now when people go to their respective conference rooms the room is already booked and knows what meeting to join. Simply hit the “join” button on the touch pad controller. That’s it. If people are joining from their desk or from home they just go into Skype For Business on their computer and hit join. That’s it. We get voice, video, screen share. It’s a fantastic system that works as easily as it should WHEN IT ACTUALLY WORKS. But screen share is often problematic. Even video can be flaky. Voice is sometimes great, sometimes not.

Now we use Slack for impromptu voice meetings. I don’t even have a phone - if someone wants to talk to me they Slack call me.

I think we might transition to Teams next. I know that SfB is end of life’d and will eventually just not be supported any longer. But we have not replaced it yet.

I know that Zoom is a big deal, but frankly I don’t see it being a world changing thing. I really don’t. At this valuation I’m not touching it. Also, sorry, but the growth rate is slowing, even if absolute dollars are going up. People pay attention to growth rates for a reason. It feels to me like people have made up their mind about Zoom and are trying to find a metric that supports their decision, rather than the other way around.


I see many anecdotal reports on Zoom saying that “No one at my company uses Zoom” or some equivalent.

Isn’t this because Zoom is just starting out and all those people who aren’t (yet) using it are part of its market. If everyone was using it already where would it grow?


The fear is with slowing growth that firms like ZM won’t achieve escape velocity of growing margins, profitability and market dominance.

Let me answer this one from this Zoom thread too. Zoom grew at 119% last year, had 84% gross margins, was profitable, and currently has $87 million in TTM Op Cash Flow and $55 million in TTM Free Cash Flow. Market dominance remains to be seen.



I’ll add an anecdote: my entire company uses Zoom to teach thousands of students 100% online. We have no campus, two offices, and employees + students all around the world. We are grpwing very fast which means more licenses, more storage, etc.

There are many other companies with similar growing use-cases.

It’s possible we (or other companies like us) could shift to a new platform if something that is as secure, reliable, and easy to use comes out at a cheaper price point.

I’m not sure that’s a likely scenario because Zoom is extending its lead.

We are just one company and products like Zoom and Slack are enabling us to do business and in this case, provide education in ways that were never possible other wise. There are hundreds of other use cases with traditional models that used to require massive campuses, stores, or offices and 100% in person communication.

I don’t think in-person stuff ever goes away but now businesses have tons of flexibility to scale and maintain customer satisfaction.


I’m seeing a lot of stories on here about how I work for this big company, and I talk to other big companies all day long and none of us use Zoom.

That is not what Zoom is, yet.

The market for Zoom has been small and medium sized businesses, companies that have very small or no IT department. Companies that want a solution that just works, without any hassle.

Zoom has a growth strategy in 4 parts.

  1. Move upmarket

Clearly there is a lot market left for Zoom. They have 466 customers > $100K in ARR. They only have 5% of the fortune 500 above $100 K right now, or 25 companies. The fact that most of the big companies aren’t using Zoom yet is great, plenty of market available. With the large net retention rate, examples of big companies like HSBC, and expanding number of companies above $100K, this strategy is working. The market is every business in the world.

  1. International

Currently 20% of their revenue is international, growing at 127%. They just expanded from 3 to 8 international offices. 20% of revenue with only 3 international offices, clearly a product companies can get on their own without a salesperson.

  1. Zoom Phone

Zoom is working to become more than video, they want to be the communications company for business. They are rolling out Zoom Phone, and have chat. 59% of Zoom phone sales are from new customers. This strategy will help them move up market if they are able to help enterprise size companies with the entire communications bundle. I predict in the next 2 years they drop Video from their name, and become Zoom Communications.

  1. Zoom Rooms

37% of existings customers have Zoom rooms. Only a 4% penetration rate thus far, a lot of market left.

Probably the most impressive thing about Zoom, is their profitability. They are able to grow above 90% and still improve cash flows. Most companies have to invest all the cash they make to grow, not Zoom. 1st 6 months of the year , they have cash flow from operations of 20% of revenue, up from 15% last year. This is a company that will soon be valued on cash flow, like TEAM, VEEV, PAYC.

The risk is, they hit a wall and aren’t able to move up market. So far so good.

Jim (long ZOOM)


Looks like while I was writing my post, Saul said some of the same things. Sorry for repeating it.

And I am long ZM, not ZOOM.


Anecdotally, my company uses both Webex and Zoom. We also utilize Slack and before that used Skype (primarily for IM) and I’ve dabbled in other conferencing services like GoToMeeting, etc. Webex used to be more flaky, but in the last year or so my experience is it’s gotten much more stable and reliable.

In terms of features, again my experience is that the two are virtually identical in terms of core features. Here are a couple of sites that compare the high level features:……

Not a lot of daylight between the two in terms of core features. Looks like Zoom may have the edge in terms of having an API as well as a greater number of out-of-the-box integrations, but I suspect the vast majority of customers won’t ever even consider utilizing those features let alone actually go forth with leveraging them.

Financials may be stellar (I’ll leave it to you all to pontificate on that), but IMO it’s one of the least moat-y products of all the SAAS investments bandied about on this board.

FWIW: I’ve worked in the SAAS biz as a developer/analyst/manager for over two decades now. Doesn’t make me an expert on conferencing software (if anything it makes me an atypical end user), but I do know my way around a SAAS UI.

ZM’s core features are more or less the same as competitors and cost of switching is virtually nil. Could be another example of a non-zero sum game/rapidly expanding TAM lifting all boats and ZM does well or ZM could fall out of favor for the next shiny toy, growth slows dramatically and stock follows accordingly.

If I had to guess, I’d say the truth will lie somewhere between these two outcomes which probably means ZM will come to dominate the space and their stock will burn hotter than 1000 suns for the next 10-20 years just to spite me.


no position in ZM or CSCO


Saul, you might be right about Zoom being too new to have too many customers. All I (and presumably others) can share is what we’ve seen. For example, we don’t do too many video conference calls, but we do a lot of calls that share a screen. Sure, that needs “video” in the sense that it needs a screen updating in real-time. But we’re seeing computer screens, not people. Only a slight difference. In fact, I keep my laptop camera taped over all the time. I will admit sometimes it is nice to see the other person, but it doesn’t seem to add a ton. Calls with vendors (I’ll have three this week alone) are almost always done via WebEx, and frankly we have no issues with that. Again, these calls are heavily focused on content, not video. Screen share is a must, video is not.

My employer does a LOT of international travel specifically to get face-to-face time with employees. We are scaling back on that however. And all signs point to us migrating to Teams. We already have a few rooms with large Microsoft surface video conferencing to try out.

Some fields will be obvious were live video is required. Tele doctors for one. We once had tech-support trouble shoot a treadmill issue in our home via video conference on a smart phone, where the looked at the lights on the control board as I hit buttons.

I guess what I don’t see is why Zoom is significantly better than the other alternatives. They have competition, those products are good, some are well established. This isn’t a Mongo DB disrupting the relational model with something entirely new, for example. Maybe Zoom’s thing is getting new customers, especially smaller outfits who have nothing yet. I dunno. I’m stepping back into select SaaS stocks this month. AYX, SHOP and ZS already have small purchases, others are being considered. But ZM, at this price, won’t be one of them.


Just a couple thoughts from other information sources to which I subscribe:

  • According to Gartner, by 2022, 65 percent of meeting solutions users will take advantage of SIP/VoIP-based audio conference tools

  • The 65 percent reference is up from 20 percent in 2017

  • According to Gartner, by 2022, 40 percent of meetings will be facilitated by virtual concierges and advanced analytics

  • Size of the video communications market varies considerably depending on the source referenced. According to research from Markets and Markets, the video communications market is expected to grow an average of 8 percent a year to nearly $20 billion by 2023 (referenced elsewhere it has been stated the industry will register a CAGR of 9.2 percent from 2018 to 2025)

One other item that I am not sure has been addressed and I apologize in advance if it has:

  • Zoom FedRAMP authorization has been approved with the sponsorship of US Dept of Homeland Security; allowing federal agencies and contractors to securely use Zoom for video meetings. Zoom got the nod over Cisco and Microsoft

Lastly, although it is a bit promotional in content; here is a link to Harry Mosely (Zoom CIO) at the Gartner IT Symposium discussing Zoom and the impact it can have on corporate culture:…