Cloud Stocks: Zendesk’s Products Help Increase Average Deal Size

According to a recent report, the global Complaint Management Software Market is expected to grow at 11% CAGR in 2028. Zendesk (NYSE: ZEN) is a leading player in the market that continues to outpace the market’s forecast. Rival Freshworks is not too far away, preparing for its IPO.

Zendesk’s Financials

Zendesk’s first-quarter revenues grew 26% to $298 million, ahead of the market’s estimate by 1.21%. GAAP net loss was $49 million. Adjusted EPS was $0.17, beating the Street’s estimates of $0.12.

For the second quarter, Zendesk expects revenues of $317-$322 million, compared with the market’s forecast of $309.6 million. For the full year, it expects revenues of $1.298-$1.318 billion compared with the market’s forecast of $1.3 billion.

Zendesk’s Product Adoption

Earlier this year, Zendesk had introduced the new Zendesk Suite, a simplified complete customer service solution that included comprehensive social and native messaging capabilities, thus simplifying the ability for businesses to connect with their customers through the customer’s preferred communication channel. It also introduced embedded voice so that businesses no longer need to list a phone number in every country from which they want to offer voice support. Additionally, Zendesk customers using its unified Agent Workspace are able to self-activate WhatsApp numbers for free.

The solution has seen strong adoption within the first two months of its launch. It has attracted more than 3,000 customers and accounts for nearly 7% of its annual recurring revenue. This new offering has also helped raise the average deal size for Zendesk, suggesting that the market is pleased with the maturity of the products that it is offering.

During the quarter, its total annual recurring revenue (ARR) from customers with ARR of $250,000 or more grew 40% over the year, and total ARR from customers with ARR of $500,000 or more grew 50% over the year, both outpacing the average growth rate of total ARR.

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Disclosure: All investors should make their own assessments based on their own research, informed interpretations and risk appetite. This article expresses my own opinions based on my own ...

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