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Zoom Video Communications Inc. reported third-quarter results on Monday.
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Zoom Video Communications Inc. reported another blockbuster quarter Monday, as the company’s videoconferencing software continued to be a lifeline for users during the COVID-19 pandemic, but shares still pulled back in late trading.
Zoom ZM, +1.43% said Monday that revenue jumped more than 350% for a second consecutive quarter, continuing a mind-blowing run — revenue increased 169% in the first full quarter of shelter-in-place orders in the U.S., and 355% in the next quarter. Zoom predicted that the same would happen in the fourth quarter, projecting revenue to top $800 million for the first time after recording less than $200 million in the fourth quarter least year, and increased its annual revenue goal to roughly $2.58 billion.
“We expect to strengthen our market position as we finish the fiscal year with an increased total revenue outlook of approximately $2.575 billion to $2.580 billion for fiscal-year 2021, or approximately 314% increase year-over-year,” Zoom Chief Executive Eric Yuan said in a statement announcing the results.
Shares, which have already grown by more than 580% this year, fell more than 5% in after-hours trading.
A steady decline in gross margin may have something to do with that. Zoom’s gross margin declined to 66.7% in the third quarter from 71% in the previous quarter and more than 80% before the pandemic.
While investors have jumped on Zoom this year amid the staggering gains, analysts are keeping a keen eye on 2021, when COVID-19 vaccines are expected to be available from Pfizer Inc. PFE, +2.90% and Moderna Inc. MRNA, +20.23%, and the impact that may have on Zoom’s growth as Americans possibly return to work.
For now, Zoom continues to flourish during the darkest days of the pandemic. The company reported third-quarter results that topped Wall Street estimates, with net income of $198.4 million, or 66 cents a share, compared with net income of a penny a share in the year-ago quarter. After adjusting for stock-based compensation and other effects, the company reported earnings of 99 cents a share, up from 9 cents a share a year ago.
Revenue catapulted 367% to $777.2 million from $166.6 million a year ago. Analysts surveyed by FactSet had expected earnings of 76 cents a share on revenue of $694 million.
The trajectory of revenue growth, however, is expected to slowly decline the next two quarters, according to analysts polled by Refinitiv. In the current fourth quarter, which ends in January, Zoom’s growth is expected to reach 288%, followed by 116% in the following quarter.
“(T)here’s going to be perceptual headwinds with Pfizer’s vaccine,” Chaim Siegel, an analyst at research firm Elazar Advisors, said in a note this month. Siegel lowered his rating on Zoom to buy from strong buy.
Still, Zoom remains one of the big tech winners during the pandemic, as millions of Americans use it for video chats, along with Alphabet Inc.’s GOOGL, -1.82% GOOG, -1.81% Google Meet, Microsoft Corp.’s MSFT, -0.53% Teams and Apple Inc.’s AAPL, +2.11% FaceTime.
Zoom shares have skyrocketed 603% this year, while the broader S&P 500 index SPX, -0.46% has climbed 12% in 2020.
