Zoom (ZM) earnings Q1 2021

Zoom CEO Eric Yuan speaks before the Nasdaq opening bell ceremony in New York on April 18, 2019.

Kena Betancur | Getty Images

Zoom shares rose as much as 7% and later lost some of their gains after the videoconferencing software company reported major revenue growth during its fiscal first quarter on Tuesday.

Here’s how the company did:

  • Earnings: 20 cents per share, adjusted
  • Revenue: $328.2 million

Analysts surveyed by Refinitiv had expected 9 cents in adjusted earnings per share and $202.7 million in revenue for the quarter, which ended Apr. 30. Comparing analysts’ estimates with results is not necessarily straightforward given the presence of a pandemic during the quarter, making it more difficult for analysts to accurately predict how companies will perform.

The company’s revenue grew 169% on an annualized basis in the quarter, according to a statement. Growth accelerated from 78% in the prior quarter. 

Zoom shares are up about 205% since the beginning of the year, not including today’s after-hours trading. The stock climbed higher in March as millions of people were ordered to shelter-in-place at home, even as major indexes fell and the U.S. economy weakened. The company’s core service for holding online voice and video calls has become much more popular among students, corporate workers, elected officials and families this year, as have competitors like Cisco’s Webex and Microsoft’s Teams.

In keeping with its previous practices, the company did not disclose active user numbers. However, Zoom’s mobile app had 173 million monthly active users as of May 27, up from 14 million on March 4, Bernstein analysts Zane Chrane and Michelle Isaacs, who have the equivalent of a buy rating on Zoom stock, said in a Monday note, citing data from app-analytics company Apptopia.

As more people have flocked to Zoom, other companies have taken notice, and people have come across security and privacy issues in Zoom’s software. At the beginning of April Zoom said it would spend the next 90 days finding and fixing problems. Also in April Facebook introduced a video-calling feature called Messenger Rooms that could work as alternative to the free version of Zoom, sending Zoom shares downward, and Verizon announced the acquisition of smaller competitor Blue Jeans. 

Zoom’s gross margin narrowed to 68.4%, from 82.7% in the previous quarter and 80.2% in the year-ago quarter, as it added computing capacity to handle the swell of new users.

Zoom said it had 769 customers paying over $100,000 in the trailing 12 months at the end of the fiscal first quarter, up 90% on an annualized basis, compared with 86% in the prior quarter. The company had 265,400 customers with more than 10 employees at the end of the quarter, up 354%. The growth rate in the prior quarter was 61%.

With respect to guidance, Zoom sees 44 cents to 46 cents in adjusted earnings per share on $495 million to $500 million in revenue in the fiscal second quarter. Analysts polled by Refinitiv had been looking for 11 cents in adjusted earnings per share on $223.8 million in revenue.

For Zoom’s full 2021 fiscal year the company is calling for $1.21 to $1.29 in adjusted earnings per share on $1.78 billion to 1.80 billion in revenue. Analysts polled by Refinitiv had estimated 45 cents in adjusted earnings per share and $935.2 million in revenue for the fiscal year. The Bernstein analysts said they thought the influx of new Zoom users could yield $500 million to $1 billion in additional revenue for the full fiscal year, on top of what they had already modeled before the pandemic.

Executives will discuss the results with analysts on a Zoom call at 5:30 p.m. Eastern time. 

This is breaking news. Please check back for updates.

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