Zoom’s Q2 net profit climbs 71% as it posts first billion-dollar quarter

The California-based company earned a net profit of $316.9m

Eric Yuan, chief executive of Zoom, predicts a further increase in the company’s revenue this year. AFP

Zoom Video Communications’ second-quarter net profit rose more than 70.6 per cent year-on-year as the company achieved its first billion-dollar revenue quarter, underpinned by the increasing demand for video conferencing as companies ever more adopted hybrid work models.

The California-based company’s net profit attributable to shareholders climbed to $316.9 million, almost $131.2m more than the same period last year.

Revenue during the three-month period to July 31 increased 54 per cent on an annualised basis to $1.02 billion. It was nearly 6.8 per cent up on a quarterly basis.

"We achieved our first billion-dollar revenue quarter while delivering strong profitability and cash flow,” Zoom founder and chief executive Eric Yuan said.

The May-July period marked several milestones “on our expansion beyond the UC [unified communications] platform”, said Mr Yuan.

The Nasdaq-listed company, which has its headquarters in California, raised its revenue outlook for the third quarter ending in October this year and the 2021-2022 financial year.

Zoom became an essential service for office meetings and family gatherings during the Covid-19 pandemic. A screenshot shows choir Sola rehearsing online using a Zoom platform in Riga. Reuters

Third-quarter revenue was forecast in the range of $1.01bn and $1.02bn while full-year revenue is expected to be between $4bn and $4.02 – about 55 per cent more than its financial earnings in the last financial year.

Zoom’s share price rose almost 2 per cent to $347.5 a share on Monday. But it plunged nearly 11.4 per cent to $308 in after-hours trading. The company’s stock has gained almost 7 per cent over the past 12 months.

Zoom said its second quarter revenue growth was driven by “acquiring new customers and expanding across existing customers”.

As of July 31, the company had nearly 504,900 paid customers with more than 10 employees, up by almost 36 per cent from the same period last fiscal year.

Zoom, which became an essential service for office meetings and family gatherings during the Covid-19 pandemic, invested $82.3m in research and development in three months to July 31, almost 93 per cent more than the prior year period. It was more than 8 per cent of the total revenue earned during the quarter.

The company’s operating cash flow was $468m for the second quarter, nearly 66.7m more than the same period last year.

Total cash and marketable securities stood at $5.1bn on July 31.

Industry experts have said Zoom's sizeable cash reserves will help it acquire new start-ups and competitors in the space of video conferencing.

In its largest-ever acquisition, Zoom last month agreed to purchase cloud call centre software provider Five9 for $14.7bn as part of its strategy to adapt to the post-pandemic world.

It is the fourth deal by Zoom since the start of the Covid-19 pandemic, according to Bloomberg.

In June, it joined forces with German start-up Karlsruhe Information Technology Solutions-kites, a translation software maker. It was also part of an alliance that purchased a minority stake in a software firm Assembled in March and acquired Keybase Financial Group, a secure messaging and file-sharing service, last year.

Zoom’s biggest competitors include Google's Meet and Microsoft's Teams platforms. It is reportedly also developing an email facility that will compete with Google's Gmail and Microsoft's Outlook.