Zoom almost doubles revenue forecast on remote-work boost, but costs rising

Zoom said it made a profit of US$27 million in the first three months of 2020

Zoom’s paid usage skyrockets as remote work takes over

Zoom on Tuesday (June 2) reported that its earnings soared as its video-meeting service became a popular way to work or socialize while hunkered down due to the pandemic.

"The COVID-19 crisis has driven higher demand for distributed, face-to-face interactions and collaboration using Zoom", Yuan said. Those involved in this type of activity will mostly use a free account with throwaway email addresses - a lower level of encryption will allow Zoom, with the assistance of law enforcement, to take action on repeat offenders.

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.

According to Zoom, the company made a profit of $27 million on revenue that leapt 169% to slightly more than $328 million in the fiscal quarter that ended April 30. Originally in March, the USA technology company had anticipated 33.4 to 35.8 pence of earnings per share and £719.55 million to £727.50 million in revenue for the full fiscal year.

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The company's massive influx of enterprise users is hardly surprising as more companies have leaned on services like Zoom to ease their transition to remote work among shelter-in-place related office shutdowns.

Zoom also offers a free version of its service, another factor in its popularity at a time when about 40 million people in the US have lost their jobs since mid-March, raising the spectre of the worst economic downturn since the Great Depression of the 1930s.

After a big run-up leading up to Tuesday's highly anticipated announcement, Zoom's stock initially rose even higher in extended trading.

Zoom is now being used widely by consumers, but due to privacy issues, regular Zoom users should probably look elsewhere, with platforms like Facetime and Google Duo offering a similar service but also full end to end encryption.

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"Navigating this process has been a humbling learning experience", Mr Yuan said on an investor call on Tuesday. People don't Skype anymore, and they never WebEx or Microsoft Teams or Google Meet. "Zoom hopes to find a common ground between these equities that does the most good for the most people".

"A shift in work culture triggered by the Covid-19 pandemic urges corporations to pull forward adoption of cloud-based video-conferencing tools", Boyoung Kim, an analyst at Bloomberg Intelligence, wrote Tuesday in a note.

Looking to the next quarter, Zoom is expecting revenues to rise to between $495m and $500m, with operational income of between $130m and $135m.

Yuan told analysts that Zoom owed a lot of thanks to partners such as Amazon Web Services Inc., which was able to provision the majority of the new service it needed when its data centers suddenly found themselves overwhelmed by traffic surges. "Our gross margin was further impacted by the elevated demand, especially higher levels of free meeting minutes, including those from K-12 schools in March and April".

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The company, a big beneficiary of the covid-19 pandemic fallout, nearly doubled its revenue guidance for the fiscal year.

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