Zoom booms as teleconferencing company profits from coronavirus crisis

Carla Harmon
June 3, 2020

While most of the growth was driven by Zoom's main market - the Americas - the company also reaped more global customers in the quarter.

But the once-weak privacy controls also helped make Zoom extremely easy to use, one of the reasons it became such a popular way to hold online classes, business meetings and virtual cocktail hours after most of the USA began ordering people to stay at home in effort to reduce the spread of the novel coronavirus that causes Covid-19.

In a sign that its growth isn't expected to be short lived, Zoom forecast revenue of roughly $500 million for its current quarter ending in July, more than quadrupling from the same time past year.

"Use cases have grown rapidly as people integrated Zoom into their work, learning, and personal lives".

Zoom Video Communications (NASDAQ:ZM) is up 4.5% after hours following its beat on top and bottom lines in Q1, and upbeat guidance for the current quarter and year well above consensus.

Zoom shares - which sold for $36 in its 2019 initial public offering - closed at an all-time high of $208.08 Tuesday before the earnings release.

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

CEO Eric Yuan left his mic on mute for several seconds while kicking off an earnings call with investors on Tuesday, before someone from the company's investor relations team spoke up to tell Yuan his audio wasn't coming through. "As a result, we have experienced negative press related to meeting disruption, security and privacy issues". In short, the company managed to convert many free users to paying customers, but still had to carry the costs of free usage of its product, something that has exploded in recent months.

The company also said the rapid growth seen in the April quarter might slow down as people return to work and demand from individual users dwindles.

Looking ahead into the Q2, the company expects total revenue in the range of $495-500 million and adjusted earnings in the range of $0.44-0.46 per share.

"As governments start to ease shelter-in-place restrictions, we may see a moderation of demand for our services", she added. For its full fiscal year, Zoom now expects revenue of about $1.8 billion, almost tripling in a year.

However, the record quarterly and promising outlook are shadowed by a lower margin due to higher demand from free users.

Shares of Zoom rose almost 4% in after-hours trading Tuesday following the earnings report, but later plunged to almost 5% below Tuesday's closing price.

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