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December 1, 2020updated 02 Dec 2020 1:14pm

Zoom continues meteoric rise as Q3 revenue grows 367%

By Robert Scammell

Video communication company Zoom has reported another blowout quarter in Q3 that surpassed analyst expectations to cement its place as one of 2020’s biggest growth stories.

The San Jose, California-based firm reported revenue of $777.2m – an extraordinary 367% year-on-year increase.

Net income for the quarter ended 31 October was $198.4m, with earnings per share of $0.66.

Analysts had been expecting revenue of around $694m and revenue growth north of 300%.

In the previous quarter, Zoom reported year-on-year growth of 355% as businesses flocked to its video conferencing software while offices closed around the world closed due to the coronavirus pandemic.

Its latest results demonstrate it is continuing to win over new customers even as some offices have reopened.

The company now has approximately 433,700 customers with more than 10 employees. This figure is up 485% from a year ago, back when it was little known outside of enterprise circles.

Zoom is also continuing to snap up six-figure contracts with large companies. It now has 1,289 customers contributing more than $100,000 – up 136% year on year.

More than 80% of Q3 revenue came from new customer subscriptions.

However, an increase in the number of free users saw its cloud costs increase, pushing gross profit margins to 66.7%. Pre-pandemic, this figure stood at around 80%.

Zoom Q3 results: Shares dip

“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,” said Zoom founder and CEO, Eric Yuan.

“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 added that he expects the company to “strengthen” its market position in the fourth quarter.

Zoom forecasts revenue to be between $806m and $811m, an increase of approximately 329% on the year-ago period. This suggests a slight slowdown in growth compared with previous quarters, albeit with the bar set very high.

It would make Zoom’s total revenue for fiscal year 2021 between $2.575bn and $2.580bn, a year-on-year increase of approximately 314%.

Zoom’s share price fell by 5% during extended trading following the publication of its Q3 results on Monday. Investors could have been disappointed by the slightly downgraded growth prospects for Q4. Last month, Zoom’s share price fell by as much as 17% on the news that Pfizer’s vaccine candidate had a 90% efficacy rate.

However, Zoom’s share price quickly recovered and it remains up 596% since the start of the year.

Read more: Zoom CEO: The future of work is hybrid