Zoom Reports Stellar Earnings for Fiscal Q1

Brenda Watkins
June 3, 2020

The company gained hundreds of millions of new users nearly overnight as countries worldwide went into lockdown to tackle the spread of covid-19, forcing companies and people to look for video chat services like Zoom and Microsoft Teams for work purposes. 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.

Steckelberg said on the call that the company planned to expand its own data centers to become more efficient, which should boost margins to the mid-70% range in the next several quarters. Yuan was talking after announcing the company's financial results of Q1 2020.

Zoom said it made a profit of $27 million on revenue that leapt 169 percent to slightly more than $328 million in the fiscal quarter that ended April 30.

Zoom CEO confirmed that they want to be friendly with local law enforcement agencies in order to prevent misuse of the platform.

Despite the great result, shares actually fell four percent in after-hours trading after analytsts learned of the impact of the surge on the operating costs - in particular cloud costs.

The surge has left Zoom with a market value of about $59bn greater than the combined market values of the four largest USA airlines, which have seen their businesses hammered by the coronavirus outbreak that has dramatically curtailed travel.

But it's still unclear how much of their lives people will want to live on video once they're allowed to move about more freely and return to the office.

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Analysts, as averaged by Yahoo Finance, expected Zoom to report $202.48 million in revenue, and a per-share profit of $0.09.

Zoom said sales are likely to continue to advance and reach between $495 million and $500 million in the current quarter, also topping Wall Street forecasts.

Zoom's story is interesting not just due to the rise of usage during the pandemic, but also because the company had to overcome a ton of security and privacy issues, most of which were unearthed during this quarter.

However, the number of participants has fallen from its peak in April, but "certainly over the long term, we expect it to grow beyond that 300 million number", said Ms Steckelberg.

We reported two days ago that Zoom will not be supporting end-to-end encryption for non-paying customers, saying the company reserved the right to observe meetings for enforcement purposes. "There are a lot of opportunities ahead of us", Yuan said in Tuesday's video conference without elaborating. We are talking about both paid users and those who use the service for free. To help achieve that goal, Yuan has been consulting since April with Alex Stamos, a highly respected online security expert who previously worked at Yahoo and Facebook.

In April, Mr Yuan, who is a U.S. citizen, apologised for the security lapses and the firm started rolling out a number of changes meant to fix the problems.

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