Zoom Video Communications, known for its meteoric rise during the pandemic, has been a rollercoaster for investors since its IPO. While the stock initially soared, it experienced ups and downs, leaving many wondering if it could become the next tech giant like Microsoft.
Zoom’s Growth Trajectory
Zoom’s journey in the stock market has been anything but predictable. The company went public in 2019 at $36 per share and reached a remarkable high of $568.34 in October 2020. Since then, its stock has fluctuated, currently trading at $70 per share. Investors who put in $1,000 at the IPO peak would have seen their investment surge to nearly $15,800 before retracting to just over $1,900.
Slower Revenue Growth
Zoom’s revenue trajectory mirrors a rollercoaster experience. In the fiscal year that concluded in January 2021, the company experienced an incredible 326% increase in revenue, propelled by its widespread adoption for online education, remote work, and social connections amidst the pandemic, turning it into a household brand.
However, as lockdowns lifted, fiscal 2022 showed a 55% growth in revenue. This growth significantly slowed in fiscal 2023, where it only increased by 7%. In fiscal 2024, Zoom projects a modest 3% growth, hampered by macroeconomic challenges and increasing competition from rivals like Cisco Systems’ Webex, Microsoft’s Teams, and Alphabet’s Google Meet.
Not Quite the Next Microsoft Yet
To become the next tech giant akin to Microsoft, Zoom needs to make strategic moves. In 1994, Microsoft generated $4.65 billion in revenue, growing by 24% from the previous year. Over the following 29 years, Microsoft maintained a compound annual growth rate (CAGR) of 14%. In contrast, Zoom’s current growth trajectory doesn’t match these impressive figures.
To bridge the gap, Zoom attempted to acquire the cloud-based contact center company Five9 for $14.7 billion in 2021, signaling its desire to expand its ecosystem and customer base. While the deal fell through, it’s clear that Zoom is actively seeking opportunities to secure its position in the growing video conferencing market, projected to maintain a 12% CAGR from 2023 to 2030.
The Path Ahead for Zoom
While Zoom has not yet reached the status of a tech giant like Microsoft, it continues to evolve its ecosystem. The company is introducing AI-powered features, targeting enterprise customers, and exploring avenues for monetization through ads. However, with an enterprise value of $15 billion, Zoom still has a long way to go before it can challenge the likes of Microsoft, which boasts a valuation of $2.8 trillion.
The future for Zoom remains uncertain, but one thing is clear: for it to become “the next Microsoft,” it will need to make strategic acquisitions, accelerate its revenue growth, and prove that it can thrive beyond the pandemic era. Investors and industry watchers will undoubtedly be closely monitoring Zoom’s progress in the years to come.
