Zoom Video Communications is one of the companies that have (ironically) massively gained from the COVID-19 pandemic. For the previous three quarters in the company’s fiscal year 2021, Zoom posted strong revenues that exceeded Wall Street estimates every quarter.
This has been repeated in the fourth quarter whose earnings report the company released after the market closed on Monday, March 1, 2021. These Q4 FY2021 results easily surpassed consensus estimates as still-widespread social distancing standards swept the country at the beginning of this year.
Guidance for the current quarter and full fiscal year also easily exceeded analysts’ expectations, something that has eased Wall Street’s concerns that the video conferencing’s business which hugely benefited from work-from-home directions might be sharply weakened when the economy broadly reopens later this year.
Zoom’s shares rallied more than 10% in after-hours trading on Monday, adding to a gain of more than 9.6% during the regular trading day.
Key figures from Zoom’s Q4 earnings report
Revenue: $882.5 million vs. $811.04 million expected, versus $188.25 million year-over-year
Adjusted Earnings Per Share (EPS): $1.22 vs. 79 cents expected, versus 15 cents year-over-year
Zoom benefited from an extension of 2020’s social distancing behaviours in Q4 as coronavirus cases around the holiday season shot up. This forced businesses to tell most of their employees to continue working from home for their safety and the safety of others and made many workplaces cautious of reopening too soon in 2021. This decision or non-decision thereof meant that employees, schools and teams would continue using Zoom’s services.
The company’s sales rose by 369% to $882.5 million, exceeding estimates for a rise of 331% to $811.04 million in the three months ended in January. This also unexpectedly accelerated from the 367% top-line growth Zoom posted in Q3 FY2021.
The company’s report also shows that customers with more than 10 employees surged 470% to 467,100, also exceeding estimates for a jump to nearly 442,600.
Zoom Chief Executive Officer (CEO) Eric Yuan said in a statement that reads in part thus:
“The fourth quarter marked a strong finish to an unprecedented year for Zoom. In FY2021, we significantly scaled our business to provide critical communications and collaboration services to our customers and the global community in response to the pandemic.
“As we enter FY2022, we believe we are well-positioned for strong growth with our innovative video communications platform, on which our customers can build, run, and grow their businesses; our globally recognized brand; and a team ever focused on delivering happiness to our customers.”
A sneak peek into the future
Zoom said it expected first-quarter revenue for FY2022 to come in between $900 million and $905 million, soaring well above consensus estimates for current-quarter sales of $829.5 million.
Adjusted EPS for Q1 FY2022 are anticipated to be between 95 cents and 97 cents, versus the 72-cent consensus estimate. For the full year, revenue will likely be $3.76 billion to $3.78 billion, the company added, also easily topping estimates for $3.53 billion.
Zoom’s fourth-quarter results and guidance marked strong upside surprises relative to consensus expectations, which had forecast moderating growth after a spectacular rise in 2020 as the meeting software became the go-to platform for workplaces, friends and families to stay connected as well as schools and universities to conduct remote learning.
With the roll-out of the COVID-19 vaccine going on smoothly across the globe, workers and students are expected to return to offices and schools respectively later this year. This has made analysts be concerned that Zoom and other stocks that greatly benefited in work-from-home trade and stay-at-home directives will drop.
Zoom’s guidance, however, brings confidence in the minds of investors that concerns of an unfettered slowdown in the company’s performance may have been exaggerated.
Concurrently, Zoom has also been expanding into new product categories to diversify the business outside of its flagship video conferencing service and offer a more comprehensive suite of workplace software.
Zoom’s two-year-old Zoom Phone cloud-based phone platform reached 1 million seats in January and expanded its global coverage of the service to 44 countries.
Currently, Zoom has a market capitalization of $116.65 billion and its stock goes for $400.82 per share.
PS: Stock prices quoted herein could change at any time.