Zoom Video business booms as it added more paying customers

Zoom Video Communications has raised its annual revenue forecast by more than 30 percent as it converts more of its huge free user base to paid subscriptions.
Zoom video conferencing app
The company said revenue increased 355 percent to $663.5 million in the second quarter of 2020. The gross profit of Zoom rose to 71 percent from 68 percent.

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Zoom chief financial officer Kelly Steckelberg said the company’s gross profits will remain in the same range as the fiscal second quarter for the rest of the fiscal year. She also said the company was experiencing slightly higher rates of customer cancellation than Zoom’s historical average.
Zoom CFO Kelly Steckelberg

Growth drivers

# Approximately 370,200 customers with more than 10 employees
# 988 customers contributing more than $100,000 in trailing 12 months revenue
# A trailing 12-month net dollar expansion rate in customers with more than 10 employees above 130% for the 9th consecutive quarter

“The revenue growth is accelerating,” Chaim Siegel, an analyst with Elazar Advisors, told Reuters. “Even though they gave very strong guidance for next quarter it’s possible they’re being conservative if you consider a stay-at-home back-to-school. Zoom is a household word.”

Zoom’s number of large customers – those generating more than $100,000 in revenue in the past year – more than doubled to 988 in the fiscal second quarter.

The company, founded and headed by former Cisco manager Eric Yuan, raised its annual revenue target for fiscal year 2021 to a range of $2.37 billion to $2.39 billion, from $1.78 billion to $1.80 billion previously.

Video-conferencing platforms, once used mostly as a technological substitute for in-person meetings, became a vital part of day-to-day life this year for people stuck at home under coronavirus restrictions, Reuters reported.

Zoom rivals such as Microsoft’s Teams and Cisco System’s Webex have also seen soaring usage.

Zoom faced privacy and security concerns that drove some customers to competitors earlier this year and prompted Zoom to embark on a 90-day plan to address the issues. Zoom began testing end-to-end encryption of its service in July but has not yet implemented the feature for most users.

“At Zoom, we strive to deliver a world-class, frictionless, and secure communication experience for our customers across locations, devices, and use cases,” said Zoom founder and CEO, Eric S. Yuan.

The surge in usage strained Zoom’s infrastructure, with some outages last week as schools in many parts of the United States resumed classes virtually.

Zoom has worked to convert free video conferencing users into paying customers, which is important because the company relies on both its own data centers and cloud providers such as Amazon.com’s AWS and Oracle to provide its serving.