Overall, Zoom was one of the big winners from the pandemic as its platform became essential for corporations to keep operating. Further, it was able to handle the massive growth in users and use with minimal interruptions and was able to beat out incumbents like Google
Inside the Numbers
In Q2, Zoom reported $1.36 in earnings per share, beating expectations of $1.16 per share. Revenue also beat at $1.02 billion vs. $991.0 million expected. This was a 54% increase from last year's Q2. Previously, the company had 131% revenue growth, and it forecast 31% revenue growth in Q3.
Another positive is that gross margin increased to 74.4% from 72.3% in the previous quarter as the company's new data center capacity led to lower costs. Another factor was lower usage of the platform due to schools being off for the summer. Given that most schools are expected to reopen in the coming months, this should persist.
In addition to acquiring cloud contact center software provider Five9 for $14.7 billion in stock, the company also announced a new feature - Zoom Events. This will allow organizations the ability to hold premium online meetings. It also invested in Cvent, an online event software marker which is expected to go public later this year through a SPAC.
For next quarter, Zoom expects $1.08 in earnings per share on $1.020 billion in revenue. Both figures were in line with expectations. For the full year, Zoom expects earnings per share between $4.75 and $4.79 per share and $4.01 billion to $4.02 billion in revenue. This was an increase from last year and above analysts' estimates. The company increased its outlook due to the recent increase in cases which has delayed the reopening of offices.
Stock Price Outlook
Zoom has underperformed this year with a 3% gain compared to the S&P 500's
One famed investor - Cathie Wood - is treating this as a buying opportunity, scooping up 200,000 shares. Despite the negative reaction in stocks, there are some things to like as it's growing earnings at an impressive rate and is free-cash flow positive. However, shares will likely underperform given that growth investors won't be enamored by its slowing revenue growth, while the stock isn't cheap enough for value investors.