Zoom falls sharply despite earnings beat


Eric Yuan, CEO, Zoom Video Communications

Source: CNBC

Shares of videoconferencing software company Zoom dropped as much as 10% and then pared back part of its losses in extended trading on Wednesday after the company reported earnings and guidance that exceeded analysts’ expectations.

Zoom had been on a tear during the coronavirus outbreak, as companies turned to remote work — the stock was up more than 70% for the year, not including the move that followed the release.

Here’s how the company did:

  • Earnings: 15 cents per share, adjusted, vs. 7 cents per share as expected by analysts polled by Refinitiv.
  • Revenue: $188.3 million, vs. $176.6 million as expected by analysts polled by Refinitiv.

Revenue grew 78% on an annualized basis in the fourth quarter of the 2020 fiscal year, which ended on January 31, according to a statement. In the prior quarter revenue growth topped 85%.

There were 641 customers paying Zoom over $100,000 in the trailing 12 months at the end of the quarter, up 86% year over year. The growth rate one quarter earlier was 97%. At the end of the quarter Zoom had 81,900 customers with over 10 employees, up 61% year over year. In the prior quarter that growth rate had been 67%.

In February CEO Eric Yuan said Zoom had been seeing record usage, with some companies asking workers to meet remotely to prevent further impact from the coronavirus. 

An hours-long outage affecting Microsoft’s Teams collaboration app, which supports voice and video calls, “likely shifted more use to Zoom for video meetings,” Piper Sandler analyst James Fish, who has a neutral rating on Zoom stock, wrote in a note distributed to clients on February 3.

During the quarter, Zoom said its marketplace of third-party services had exceeded 200 products.

In terms of guidance, Zoom is calling for fiscal first-quarter adjusted earnings of 10 cents per share and $199 million to $201 million, implying 64% revenue growth at the middle of the range. Analysts polled by Refinitiv had expected 6 cents in adjusted earnings per share and $185.7 million in revenue.

For the full 2021 fiscal year, Zoom’s forecast was 42 cents to 45 cents in adjusted earnings per share on $905 million to $915 million in revenue, or 79% revenue growth at the middle of the range. Analysts polled by Refinitiv had expected 30 cents in adjusted earnings per share and $868.4 million in revenue.

“I am happy to report that all of our employees in the affected areas are healthy,” Yuan said on a Zoom call with analysts on Wednesday. “Given the recent emergence and growing number of coronavirus cases in the U.S., we have directed our HQ employees to work from home, unless there is a business-critical need for them to be in the office.”

Empathy, humanity and support for one another is currently more important than revenue and growth, Yuan said. Those things will follow if Zoom truly cares about its customers, he said.

The company will expand its capacity to meet increased user demand and expects gross margins to be at the lower end of its 80% to 82% long-term target for gross margin in the 2021 fiscal year, finance chief Kelly Steckelberg said on the call.

“We have definitely seen an uptick in usage, but a lot of that is on the free side, so it’s very early to tell whether or not that’s going to convert long term into paying customers,” she said.

Correction: Zoom’s annualized revenue growth for the quarter was 78%. Its annual revenue growth for the full fiscal year was 88%.

WATCH: Zoom Video CEO says products seeing ‘record usage’

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