Zoom’s record year continues with 367pc revenue growth

1 Dec 2020301 Views

Zoom headquarters, Silicon Valley. Image: © Sundry Photography/Stock.adobe.com

Zoom has reported another quarter of substantial growth, though the rate of increasing revenue appears to be moderating as businesses prepare for a return to workplaces in 2021.

Zoom has reported revenue of $777.2m for the quarter ended 31 October 2020, more than four and a half times its revenue from the same period last year.

The video-calling platform continued its unprecedented growth in 2020 with earnings that once again beat analysts’ expectations.

While these latest figures show that Zoom’s stellar annual growth is continuing, there are signs that it is also beginning to level off. In Q1 of the fiscal year 2021, the company reported a revenue increase of 169pc, jumping to 355pc growth in Q2. With $777.2m recorded in Q3, revenue is up 367pc year-over-year, driven by new customer acquisitions as well as subscription increases for existing customers.

As of 31 October, Zoom reported a total of 433,700 clients with more than 10 employees, a jump of around 485pc on the same period in 2019. The trailing 12 months (TTM) net dollar expansion rate among these customers was above 130pc for the 10th consecutive quarter. Customers contributing more than $100,000 in TTM revenue was also up by 136pc to 1,289.

According to CNBC, significant revenue growth was seen in regions outside the Americas, with revenue in Asia Pacific, Europe, the Middle East and Africa up 629pc.

‘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’
– ERIC YUAN, ZOOM FOUNDER

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However, the year that has seen Zoom become shorthand for video calls is also seen to have an end in sight. With news of vaccines developing at a rapid pace, the return to work and some sort of pre-Covid normality expected in 2021 could signal a drop-off in revenue for the company.

Yet Zoom founder and CEO Eric Yuan sees continued opportunities for the company in the future of work. “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. We aspire to provide the most innovative, secure, reliable, and high-quality communications platform to help people connect, collaborate, build and learn on Zoom,” he said.

“Strong demand and execution led to revenue growth of 367pc year-over-year with solid growth in non-GAAP operating income and cash flow in our third fiscal quarter. We expect to strengthen our market position as we finish the fiscal year with an increased total revenue outlook of approximately $2.575bn to $2.58bn for fiscal year 2021, or approximately 314pc increase year-over-year.”

In after-hours trading on Monday (30 November), shares in Zoom fell more than 5pc on the back of this earnings report. MarketWatch attributed this to a continued decline in gross margin, which Zoom chief financial officer Kelly Steckelberg said would remain under pressure amid a surge in users signing up for free on top of escalating public-cloud service costs.

Looking ahead, Zoom has reasonably assumed an increased churn rate in the next quarter due to its high percentage of customers with monthly subscriptions. However, the company is forecasting its highest-earning quarter yet with total revenue for Q4 expected to hit between $806m and $811m. By comparison, the same quarter last year saw Zoom reporting less than $200m in revenue.

Elaine Burke is the editor of Silicon Republic

editorial@siliconrepublic.com