Zoom reveals the financial impact of the Covid-19 pandemic on its earnings

3 Jun 2020

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Zoom has reported a 169pc year-on-year jump in revenue after the global shift to remote working led to a surge in customers.

Zoom has become a household name in recent months as millions of people staying at home during the Covid-19 pandemic have turned to video conferencing for work and connecting with loved ones. Now, the company has published its Q1 earnings for the 2021 fiscal year, highlighting the impact that this shift has had on its finances.

Zoom’s revenues jumped by 169pc year on year to $328.2m. Cash flow for the quarter totalled $259m, compared with $22.2m this time last year. Meanwhile, free cash flow was $257.1m, compared to $15.3m a year ago.

Approximately 265,400 of its paying customers were companies with more than 10 employees, representing a 354pc jump on the same quarter last year. There were also 769 customers contributing more than $100,000 in the previous 12 months, a figure that was up by 90pc.

Overall, Zoom’s net income was $27m in Q1, up from just $200,000 this time last year. However, the company’s gross margin fell from 80pc to 68pc year on year. This means that while the number of paying customers has increased, the amount Zoom needs to spend to keep the growing number of free accounts operating on the platform is eating into its margins.

Looking to the next quarter, Zoom is expecting revenues to rise to between $495m and $500m, with operational income of between $130m and $135m. For the full fiscal year, the firm expects to earn revenue of between $1.775bn and $1.8bn.

No free end-to-end encryption

“We were humbled by the accelerated adoption of the Zoom platform around the globe in Q1,” said Eric Yuan, founder and CEO of Zoom.

“The Covid-19 crisis has driven higher demand for distributed, face-to-face interactions and collaboration using Zoom. Use cases have grown rapidly as people integrated Zoom into their work, learning and personal lives.”

While Zoom highlighted its various efforts to offer free accounts to those in need and the launch of a new philanthropic effort, one thing free customers will not be getting is end-to-end encryption.

Last month, the company acquired Keybase to add engineering expertise to build an end-to-end encrypted meeting mode. On an investor call yesterday (2 June), Yuan said that this level of encryption will soon be offered to paying customers but not to free accounts.

Zoom previously made headlines for claiming it had end-to-end encryption on its platform, despite this not being the case. In a recent security update its encryption was upgraded to AES 256-bit GCM that, while not end-to-end, was described as a “significant improvement” on what came before.

Colm Gorey was a senior journalist with Silicon Republic