Zoom Hits Its Stride


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Zoom’s business is flourishing. Unfortunately, the video conferencing company’s rise coincides with a global pandemic. On the plus side, it’s not like they aren’t taking the pension funds from Blue Star Airlines. 

In its Q1 earnings report yesterday, Zoom announced revenue of $328.2M, or, 169% higher than the $122M it earned during the same quarter during the prior year.

YoY growth is one thing, but we all know it’s about the expectations. And Zoom crushed those as well. Analysts were expecting only $202.7M in revenue and 9 cents EPS, even with the boon from the coronavirus. Revenue topped $300M and earnings came in at 20 cents.

What’s more? For Zoom, past performance does indicate future results. The company upped its full-year guidance to between $1.21B and $1.29B, up from $905M. And one last number, just for fun… Zoom had 173M active users as of May 27 compared to just 14M on March 4. Consider the rookie numbers pumped up.

Out of focus

Despite Zoom’s crazy numbers, the stock price actually fell almost 2% after hours. With such a big growth in users, Zoom had to outsource some of its cloud computing to AWS. As a result, its gross margin dropped from 82.7% to 68.4%. Jeffrey Commerce FTW.

Finance Chief Kelly Steckelberg acknowledged the increased costs but says Zoom is expanding its cloud computing power and hopes to get that gross margin number back up into the mid-70s.

The bottom line…

The video-conferencing market is here to stay, but Zoom needs to step its game up if it’s going to remain the top choice of remote employees. Microsoft and Facebook each have their own video messaging services looking to earn themselves some of that market share in the new industry.

Security has been a bit of a problem for Zoom, with its laissez-faire attitude towards meeting security. Stories of random people hijacking wholesome meetings led to the NYC department of education to drop Zoom and move over to MicrosoftThey better tighten it up…playing with the big boys now.

Water Cooler Talking Point(s)

💧”Anytime there’s a chance ARod might pop into my video conference, I’m willing to risk the security breach.” (Ian, The Water Coolest HQ)


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The Water Coolest is a daily business newsletter consisting of business news, financial advice, and unfiltered commentary. Delivered fresh in your inbox every morning so you're ready to snap necks and cash checks. Written by Tyler Morrin, AJ Glagolev, Nick Ellis, and Ian Barto.