San Francisco, CA – As global antitrust regulators increase their scrutiny of Big Tech’s platform practices, smaller app companies are finding ways to compete more effectively against the tech giants. For instance, Apple has recently faced scrutiny from the U.S. Department of Justice and the European Commission. In response to this trend, Microsoft announced plans to unbundle its Teams apps from the Office Suite bundles, a move aimed at avoiding further scrutiny on its own platform.

The competition between Zoom Video and Microsoft Teams is intensifying, with both companies vying for dominance in the online communications market. While Zoom experienced a surge in demand during the pandemic lockdowns, the company is now facing challenges as it seeks to transition its business model to adapt to evolving market trends and competition.

Zoom CFO, Kelly Steckelberg, outlined the company’s business transitions at a recent technology conference, highlighting the evolution of Zoom from a video conferencing platform to a full-stack workforce collaboration and communications platform. Despite this evolution, Zoom is facing difficulties in monetizing its enterprise user base, with a falling Net Dollar Expansion Rate for Enterprise Customers.

On the other hand, Microsoft Teams has been able to penetrate the enterprise market at a faster pace, leading to more stable download trends for the app. The recent unbundling of Teams from the Office Suite bundles presents a significant opportunity for Zoom to capture market share. Zoom’s management is focused on rightsizing and monetizing its existing user base to drive revenue growth, as the company looks to compete more effectively against Microsoft Teams.

While Zoom’s product roadmap shows promise, the company’s revenue growth has been declining steadily. With conservative guidance for FY25 and a fully priced valuation, Zoom will need to demonstrate evidence of growth and market penetration to attract investors. The risk of competition eating into Zoom’s market share remains a key concern, as the company seeks to expand its presence in the enterprise market and increase attach rates for its products.

In conclusion, Zoom is facing a pivotal moment as it navigates through challenges in monetization, market competition, and product-market fit. While the company is well-positioned to benefit from industry catalysts, such as Microsoft’s Teams unbundling, investors will be closely watching for evidence of growth and market share retention before making investment decisions. For now, Zoom is rated as a Hold, with potential for expansion if the company can demonstrate its ability to capitalize on market opportunities and overcome existing challenges.