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Zoom transforms hype into huge jump in sales, customers
ZOOM Video Communications Inc demonstrated that paying customers have flocked to its virtual-meeting software, transforming the once-niche appmaker into a popular communications service and positioning it to benefit as the nature of work, school and life is upended.
Zoom reported sales soared in the three months ended April 30, when the coronavirus pandemic spurred a wave of stay-at-home orders for millions of people worldwide. The company expects the trend to continue the rest of the year, and projected that revenue and profit will leapfrog investors' earlier expectations.
"A shift in work culture triggered by the Covid-19 pandemic urges corporations to pull forward adoption of cloud-based video-conferencing tools," Boyoung Kim, an analyst at Bloomberg Intelligence, wrote on Tuesday in a note. Zoom's "intuitive technology and strong brand recognition should help the company pick up market share in video conferencing, outpacing the industry".
Sales in the current quarter will be as much as US$500 million, the San Jose, California-based company said on Tuesday in a statement. Revenue in the third and fourth fiscal quarters should be consistent with that performance, Chief financial officer Kelly Steckelberg said during a conference call.
Overall, Zoom expects to generate as much as US$1.8 billion this fiscal year, which is almost triple the size of the business last year. Analysts, on average, estimated US$930.8 million, according to data compiled by Bloomberg.
While security and privacy issues plagued the system early in the quarantine, Zoom has become an essential service, attracting more than 300 million participants some days, up from 10 million in December. The software maker allows gatherings of as long as 40 minutes for no charge.
While Zoom has attracted more buzz than corporate rivals, the results on Tuesday suggested it can attract the paying clients needed to compete against services from Microsoft Corp, Cisco Systems Inc and Alphabet Inc's Google.
The software maker said its potential market has expanded beyond an estimate of US$43 billion by 2022 made by analyst IDC, according to a 2019 regulatory filing.
In the fiscal first quarter, revenue increased about 170 per cent to US$328.2 million. Analysts, on average, expected US$203 million, according to data compiled by Bloomberg. Profit, excluding some items, was 20 cents a share, compared with analysts' average projection of 9 cents.
Shares were little-changed in extended trading after closing at a record US$208.08 in New York. The stock has more than tripled this year.
The company said its expects adjusted profit in the fiscal year will be US$355 million to US$380 million, or US$1.21 to US$1.29 a share. Analysts had estimated 46 cents, just more than Zoom's earlier forecast.
The company said it ended the quarter with about 265,400 customers with more than 10 employees, a more than four-fold increase from the same period a year earlier.
The company now has 769 corporate clients that have spent more than US$100,000 on Zoom's products over the last 12 months, about double from a year earlier. BLOOMBERG