Zoom’s Q3 net profit surges as customer base grows

The San Jose-based company has increased its revenue outlook to $2.58bn for the full financial year

File-This April 18, 2019, file photo shows a Zoom ad, in New York. Zoom’s videoconferencing service remains a fixture in pandemic life, but its breakneck growth is showing signs of tapering off as investors debate whether the company will be able to build upon its recent success after a vaccine enables people to intermingle again. Zoom highlighted its head-spinning success story again Monday, Nov. 30, 2020, with the release of its quarterly results for the August to October period. (AP Photo/Mark Lennihan, File)

Zoom Video Communications said its third-quarter net profit surged nearly 90 times from the year-earlier period, as revenue soared on the back of an increase in customers as second and third waves of coronavirus infections forced countries to implement further lockdowns or movement restrictions.

Net profit surged to $198.4 million, from $2.2m in the same period a year ago, the Nasdaq-listed company said in a regulatory filing.

Revenue for the three months ending October 31 jumped 367 per cent to $777.2m – beating analysts' estimates of $694m, according to Refinitiv.

“We remain focused on the communication needs of our customers and communities as they navigate the current environment … and adapt to a new world of work from anywhere using Zoom,” Eric Yuan, the company’s founder and chief executive, said.

“We aspire to provide the most innovative, secure, reliable and high-quality communications platform to help people connect, collaborate, build and learn,” he added.

Zoom shares, which started the year at around $69, closed at $478.4 on Monday after falling 5 per cent in after hours trading.

The company increased its revenue outlook for the fourth quarter and the full financial year, with fourth quarter revenue to hover between $806m and $811m. For the full year, Zoom estimates revenue between $2.57 billion and $2.58bn – more than three times its financial earnings last year.

“We expect to strengthen our market position as we finish the fiscal year with an increased total revenue outlook of approximately $2.57bn to $2.58bn … approximately 314 per cent increase year-over-year,” Mr Yuan said.

The main drivers of revenue growth included acquiring new customers and expanding across existing customers, the company said.

By the end of the third quarter, it had nearly 433,700 customers with more than 10 employees, almost 485 per cent up from the same quarter last year.

The video communications platform has been adopted by businesses, schools, universities and individuals due to Covid-19-related movement restrictions and lockdowns. The company expects to increase its user base further in the remaining year.

“The top line result exceeded the high end of our guidance range of $690m [for Q3] due to strong sales and marketing execution in both our online and direct businesses, as well as lower-than-expected churn,” Kelly Steckelberg, chief financial officer at Zoom, said.

Revenue growth was primarily due to subscriptions provided to new customers, which accounted for approximately 81 per cent of the increase, while subscriptions provided to existing customers accounted for 19 per cent.

“This demand was broad-based across products, industry verticals, geographies and customer cohorts,” she added.

Revenue in the Asia-Pacific and Europe, Middle East and Africa grew 629 per cent, compared with more than 300 per cent growth in the Americas, Ms Steckelberg said.

Zoom increased its research and development spending in the third quarter to $25m, up 80 per cent year-on-year. R&D was almost 3 per cent of the total revenue earned during the quarter.

“We are committed to prioritise R&D hiring to drive further innovation, expansion and security into our platform,” the company said.

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