Zoom’s first quarter profit soars as revenue surges on strong digital uptake

The company has increased its revenue outlook to $3.9bn for the full financial year

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

Zoom Video Communications’ net profit surged more than 741 per cent in the first quarter, compared with a year ago, as companies increasingly adopted hybrid work models and demand for video conferencing increase, boosting the company’s revenue.

Net profit to shareholders surged to $227 million, from $27m in the same period a year ago, the Nasdaq-listed company, said in a regulatory filing.

Revenue during the February-April period increased 191 per cent on an annualised basis to $956.2m, beating analysts’ estimates of $906m, according to Refinitiv.

“We kicked off the fiscal year with a very strong first quarter … with strong profitability and cash flow,” said Zoom founder and chief executive Eric Yuan.

“Our steadfast commitment to empowering customers to work and learn from anywhere with our expansive, innovative and frictionless video communications platform continued to drive our results,” he added.

Zoom’s shares closed nearly 1.2 per cent lower at $327.7 on Tuesday. They rose 2 per cent in after-hours trading to $334.4 a share.

The company’s stock has gained more than 57 per cent over the past 12 months.

Zoom raised its revenue outlook for the second quarter ending in July this year and the 2021-2022 financial year.

Second-quarter revenue was forecast in the range of $985m and $990m while full-year revenue is expected to be between $3.97 billion and $3.99bn – about 50 per cent more than its financial earnings in the last financial year.

"We are pleased to raise our total guidance range for the full fiscal year … we are energised to help lead the evolution to hybrid work that allows greater flexibility, productivity, and happiness to both in-person and virtual connections," said Mr Yuan.

“We have also opened our technology portfolio to developers … work is no longer a place, it’s a space where Zoom serves to empower your teams to connect and bring their best ideas to life,” he added.

Zoom first quarter revenue growth was underpinned by new customers and expanding across existing customers.

By the end of the first quarter, the company had nearly 497,000 paid customers with more than 10 employees, up by almost 87 per cent from the same period last fiscal year.

The video communications platform has been adopted by businesses, schools, universities and individuals due to Covid-19 related movement restrictions and lockdowns. Reuters

The company invested 65.2m in research and development in three months to April 30, nearly 6.8 per cent of the total revenue earned during the quarter. It is reportedly developing an email facility that will compete with Google's Gmail and Microsoft's Outlook.

The company’s operating cash flow was $533.3m for the first quarter, nearly 274.3m more than the same period last year.

Total cash and marketable securities stood at $4.7bn on April 30.

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