Zoom doubles forecast for full-year revenue on remote-work boost

Zoom Video Communications Inc nearly doubled its expectations for annual sales on Tuesday, driven by a surge in users as more people work from home and connect with friends online during coronavirus lockdowns.

Shares of the San Jose, California-based company rose nearly 5 percent in extended trading after Zoom’s revenue and profit for the first quarter also beat estimates by a wide margin.

The company, which has transformed itself from a business-oriented teleconferencing tool to a global video hangout, had come under fire over privacy and security issues, prompting it to roll out significant upgrades.

However, the latest quarterly report shows the company now has about 265,400 customers with more than 10 employees, nearly a fourfold increase from a year earlier.

The company competes with Cisco Systems Inc’s Webex, Microsoft Corp Teams and Google’s Meet platform for paying customers, particularly enterprises, while offering a free version to consumers.

Zoom reported revenue of $328.2m, beating analysts’ estimates of $202.7m, according to IBES data from Refinitiv.

While Zoom’s revenue increased sharply, its costs rose even more steeply. The company’s cost of revenue was up 330 percent to $103.7m, which lowered its gross margin to 68.4 percent from 80.2 percent a year earlier.

One of Zoom’s biggest costs is data centres and bandwidth to host calls. The company runs some of its own data centres, but also pays for cloud computing services from Amazon.com Inc’s Amazon Web Services and Microsoft, and in April added Oracle Corp as a vendor.

Excluding items, the company earned 20 cents a share in the latest quarter, beating analysts’ estimate of nine cents.

The company raised its full-year revenue forecast to a range of $1.78bn to $1.80bn from $905.0m to $915.0m. Analysts on average expected revenue of $935.2m

Zoom’s shares have more than tripled this year.