Paying customers flock to video app Zoom
Company has been able to weather early missteps as how we work changes
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 stayat-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 cloudbased video-conferencing tools,” Boyoung Kim, analyst at Bloomberg Intelligence, wrote 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 $500 million (U.S.), the San Jose, Calif.-based company said 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 $1.8 billion this fiscal year, which is almost triple the size of the business last year. Analysts, on average, estimated $930.8 million, according to data compiled by Bloomberg.
Zoom’s shares slid about one per cent Wednesday morning in New York after closing at a record $208.08 on Tuesday. The stock has tripled this year.
Chief executive officer Eric Yuan has tried to ensure that his virtual-meeting platform can cope with a swell of demand from people staying home to curtail the spread of COVID-19. 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 Tuesday suggested it can attract the paying clients needed to compete against services from Microsoft, Cisco Systems and Google.
The software maker said its potential market has expanded beyond an estimate of $43 billion by 2022 made by analyst IDC, according to a 2019 regulatory filing. And executives said they have expanded hiring plans to take advantage of the opportunity. While Steckelberg warned that the lifting of stayat-home orders may cause fewer people to use Zoom’s software, the company said it hadn’t seen the numbers decline yet in areas that have reopened.
Many educational institutions that teach through Zoom have decided to host virtual classes through at least the fall, pointing to robust demand for the app through the rest of the year. To continue growing at a torrid pace, Zoom will sell its Phone software and Rooms hardware products to existing customers, Steckelberg added. Yuan vowed not to rely on advertising to make money from its legions of free users.
In the fiscal first quarter, revenue increased about 170 per cent to $328.2 million. Analysts, on average, expected $203 million, according to data compiled by Bloomberg. Profit, excluding some items, was 20 cents a share, compared with analysts’ average projection of nine cents.
The company said its expects adjusted profit in the fiscal year will be $355 million to $380 million, or $1.21 to $1.29 a share. Analysts had estimated 46 cents, just more than Zoom’s earlier forecast.