Zoom Video Communications has raised its annual revenue forecast by more
than 30% after comfortably beating quarterly estimates as it converts more
of its huge free user base to paid subscriptions.
Shares of Zoom, which have surged almost four-fold this year, rose 9.3% to
$355.30 after the bell on Wall Street last night.
Earlier in the day they hit a record closing high of $325.10 in regular
trading.
Video-conferencing platforms, once used mostly as a technological substitute
for in-person meetings, became a vital part of day-to-day life this year for
people stuck at home under coronavirus restrictions, be it for work, school
or socializing.
Zoom rivals such as Microsoft's Teams and Cisco System's Webex have also
seen soaring usage.
When the pandemic hit in early 2020, Zoom was a relative upstart founded by
a former Cisco executive that had gone public on a promise to make video
conferencing software easier to use.
But the ease of use came with privacy and security concerns that drove some
customers to competitors earlier this year and prompted Zoom to embark on a
90-day plan to address the issues.
Zoom began testing end-to-end encryption of its service in July but has not
yet implemented the feature for most users.
The surge in usage also strained Zoom's infrastructure, with some outages
last week as schools in many parts of the US resumed classes virtually.
Since the start of the pandemic, Zoom has worked to convert the mass of free
users into paying customers.
This is important because the company relies on both its own data centres
and cloud providers such as Amazon.com and Oracle to provide its serving,
meaning it must bear costs for free users.
The company said revenue rose 355% to $663.5m, topping analysts' average
estimate of $500.5m.
The company's gross profit rose to 71% from 68%, but remains far below the
80% range Zoom operated at before free users flocked to the service.
On a conference call with investors, Zoom's chief financial officer Kelly
Steckelberg said the company's gross profits will remain in the same range
as the fiscal second quarter for the rest of the fiscal year.
She also said the company was experiencing slightly higher rates of customer
cancellation than Zoom's historical average, but that the new rates had been
factored into the company's forecast.
Zoom's number of large customers - those generating more than $100,000 in
revenue in the past year - more than doubled to 988 in the fiscal second
quarter.
The company, founded and headed by former Cisco manager Eric Yuan, raised
its annual revenue target for fiscal year 2021 to a range of $2.37 billion
to $2.39 billion, from $1.78 billion to $1.80 billion previously.
The company said that net income attributable to common stockholders rose to
$185.7m, or 63 cents per share, from $5.5m, or two cents per share, a year
earlier.
Excluding items, the company earned 92 cents per share, beating the average
analyst estimate of 45 cents, according to IBES data from Refinitiv.
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