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Zoom Soared After 355% Revenue Growth

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Key Points

  • Zoom shares rose as much as 25 percent in extended trading on Monday after the company posted second-quarter fiscal results that were higher than anticipated by analysts.
  • Zoom’s earnings reached 92 cents per share, adjusted, versus 45 cents per share as analysts predicted.
  • The company’s revenue reached $663.5 million versus the $500.5 million analysts had expected.
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Zoom Video Communications shares rose as much as 25 percent in extended trading on Monday after the company posted second-quarter fiscal results that were higher than anticipated by analysts and significantly increased its full-year guidance.

According to Refinitiv, Zoom’s earnings reached 92 cents per share, adjusted, versus 45 cents per share as analysts predicted. The company’s revenue reached $663.5 million versus the $500.5 million analysts had expected.

In the second quarter of the fiscal year, which ended on July 31, revenue increased 355 percent on an annualized basis. Zoom’s revenue rose 169 percent in the previous quarter. New customer subscriptions provided 81 percent of revenue growth, and customer churn was lower than expected, finance chief Kelly Steckelberg told analysts on a Zoom call.

Zoom’s income was close to $186 million, up from a mere $5.5 million in the quarter of last year. Zoom raised its adjusted gross margin to 72.3 percent, partially due to increasing the capacity of its own data center facilities, from 69.4 percent one quarter earlier.

During the quarter, people became more dependent on Zoom’s video calling technology for corporate, educational, and personal use, after the coronavirus pandemic prompted officials to order people around the world to stay home, meaning that people could no longer meet in person as before.

The company recruited experts in information security and diversity, added Lt. Gen. Herbert Raymond “H.R.” McMaster to its board, announced plans for research and development centers in Phoenix and Pittsburgh, and said it acquired secure messaging startup Keybase.

Zoom reported 148.4 million active monthly users in the quarter, up 4,700 percent year-over-year, RBC analysts led by Alex Zukin wrote in a note distributed to clients on Aug. 17, citing data from SensorTower, an app analytics startup. The analysts hold Zoom stock the equivalent of a buy rating.

Except for the after-hours move, Zoom shares have risen by 369% since the beginning of the year, while the S&P 500 index has risen by about 9%. Zoom stock increased nearly 9 percent during Monday’s trading session, while the Dow Jones Industrial Average and S&P 500 closed the day lower.

As per guidance, on an adjusted basis Zoom sees fiscal third-quarter earnings of 73 cents to 74 cents per share and revenue of $685 million to $690 million. Analysts polled by Refinitiv had expected adjusted earnings of 35 cents per share on revenues of $492.9 million.

Zoom has raised its guidance for the entire fiscal year 2021. It called for adjusted earnings per share of $2.40 to $2.47 and revenue of $2.37 billion to $2.39 billion, suggesting an annual revenue growth of 282 percent in the middle of the range. The consensus among analysts surveyed by Refinitiv was $1.30 in adjusted earnings per share and revenue was $1.81 billion. The highest projections for adjusted earnings per share were $1.60 and revenue of $1.86 billion. Zoom’s previous full-year guidance stood at $1.21 to $1.29 in adjusted earnings per share on revenue of $1.78 billion to $1.80 billion.

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