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Zoom forecasts upbeat revenue, expects boost from hybrid work

With rapid vaccination efforts and life slowly returning to normal, analysts are skeptical of the sustainability of Zoom's growth, especially with rivals Microsoft, Cisco and Google snapping at its heels.

By: Reuters |
June 2, 2021 8:59:30 am
A sign for Zoom Video Communications ahead of their Nasdaq IPO in New York. (AP Photo/Mark Lennihan, File)

Zoom Video Communications Inc on Tuesday forecast current-quarter revenue above estimates, as increased adoption of hybrid work models by companies is expected to drive steady demand for its video conferencing tools.

Zoom became a household name and investor favorite in the past year, as businesses and schools switched to its services for virtual classes, office meetings and socializing.

But with rapid vaccination efforts and life slowly returning to normal, analysts are skeptical of the sustainability of Zoom’s growth, especially with rivals Microsoft, Cisco and Google snapping at its heels.

“The extent to which Zoom can compete sustainably with the likes of Cisco and Microsoft remains to be seen over the next few quarters as we begin to enter true COVID comparable quarters,” said Joe McCormack, senior analyst at Third Bridge.

However, the San Jose, California-based company assuaged some of those concerns by forecasting current-quarter revenue in the range of $985 million to $990 million, above Wall Street’s estimate of $931.8 million, according to IBES Refinitiv data.

Shares of the company were up 2%, after falling as much as 5% in after-market trading on higher costs. In the first quarter ended April 30, costs jumped 155% to $265 million.

The surging number of free users on Zoom’s platform has led to higher costs for the company, which operates some of its own data centers.

Zoom, which had come under scrutiny for security related issues, is shifting focus on its two-year-old cloud-calling product Zoom Phone and conference-hosting product Zoom Rooms as bigger players Facebook and Google amp up their video products.

Zoom posted adjusted profit of $1.32 per share on revenue that nearly tripled to $956.2 million in the quarter, compared with estimates of a profit of 99 cents and $906 million in revenue.

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