Zoom nearly doubles revenue forecast on remote-work boost

Brenda Watkins
June 3, 2020

Zoom Video Communications Inc. reported quarterly sales that leapfrogged estimates, showing that a surge in demand for its video-conference service during the coronavirus pandemic has translated into more paying customers.

Video conferencing, webinars and collaboration tools are at the core of Zoom's business.

In a sign that its growth is not expected to be short lived, Zoom forecast revenue of roughly $500m for its current quarter ending in July, more than quadrupling from the same time a year ago.

Tuesday's release of the once-obscure company's financial results for the February-April period provided a window into the astronomical growth that has turned it into a Wall Street star.

Of course, the number of users tells only a small part of the story - more important is the revenue generated, and Zoom today announced that their revenue grew 169 percent from a year ago to $328.2 million.

The US company has been one of the few winners of the coronavirus crisis, beating rival video calling services from Microsoft, Google and Facebook to become the de facto app for many households and businesses. After its earnings smash, shares of Zoom were up slightly Update: Zoom shares are now up 2.3% ahead of its earnings call; investors had priced in this outsized-performance, it seems.

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While Zoom's revenue increased sharply, its costs rose even more steeply. After a big run-up leading up to Tuesday's highly anticipated announcement, Zoom's stock gained almost 3% in extended trading to $213.60 - more than five times the company's initial public offering price of $36 less than 14 months ago.

Due to the global pandemic and worldwide lockdowns, Zoom has seen a surge in individual and small enterprise users.

Zoom CEO Eric Yuan gave a special shout-out to longtime partner Amazon Web Services and its CEO Andy Jassy for helping the company meet demand. For fiscal 2021, the company predicts total revenue in the range of $1.775-1.8 billion and adjusted earnings in the range of $1.21-1.29 per share. Analysts had estimated 46 cents, just more than Zoom's earlier forecast.

Zoom also offers a free version of its service, another factor in its popularity at a time when about 40 million people in the U.S. have lost their jobs since mid-March, raising the specter of the worst economic downturn since the Great Depression of the 1930s.

For San Jose, Calif. -based Zoom, the new virus has been both a boon and burden. Profit, excluding some items, was 20 cents a share, compared with analysts' average projection of 9 cents. Zoom's customer numbers were similarly sharp, with the firm reporting that it had 265,400 customers with more than 10 seats (employees) at the end of the quarter, which was up 354% from the year-ago period.

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