Back to top

Image: Bigstock

Zoom Video (ZM) to Report Q2 Earnings: What's in Store?

Read MoreHide Full Article

Zoom Video (ZM - Free Report) is set to report second-quarter fiscal 2021 results on Aug 31.

For the quarter, the company expects non-GAAP earnings between 44 cents and 46 cents per share. Total revenues are expected between $495 million and $500 million.

The Zacks Consensus Estimate for earnings stayed at 45 cents per share over the past 30 days. The company had reported earnings of 8 cents per share in the year-ago quarter.

The consensus mark for revenues is pegged at $498.2 million, suggesting 241.6% growth from the figure reported in the year-ago quarter.
 

Zoom Video Communications, Inc. Price and EPS Surprise

 

Zoom Video Communications, Inc. Price and EPS Surprise

Zoom Video Communications, Inc. price-eps-surprise | Zoom Video Communications, Inc. Quote

Zoom Video’s earnings beat the Zacks Consensus Estimate in all of the past four quarters, the average surprise being 278.6%.

Let’s see how things have shaped up for this announcement.

Factors to Watch

Zoom Video’s fiscal second-quarter revenues are expected to have benefited from the coronavirus-induced work-from-home and online-learning wave.

Markedly, the company’s solution was selected by Los Angeles Unified School District during the quarter. Claflin University also inked a five-year strategic partnership with Zoom Video.

Notably, the company’s freemium business model helps it win customers rapidly, which it can later convert into paying customers. Net dollar-expansion rate on a trailing 12-month basis was more than 130% in first-quarter fiscal 2021. The momentum is expected to have continued in the to-be-reported quarter.

Further, the launch of Zoom For Home, that supports remote working for business professionals, is expected to have driven adoption of the company’s solutions.

Moreover, the company’s efforts to eliminate the security and privacy loopholes like zoombombing is expected to have helped it maintain the existing enterprise user base as well as attract new customers.

The company made Zoom 5.0 supported by AES 256-bit GCM encryption publicly available during the to-be-reported quarter.

Moreover, Zoom Video hired Jason Lee as its chief information security officer. He is the former senior vice president of Security Operations at Salesforce as well as the former principal director of Security Engineering at Microsoft.

In this regard, the acquisition of Keybase, a secure messaging and file-sharing service is also noteworthy. The takeover accelerates Zoom Video’s plan to build end-to-end encryption service.

Further, Zoom Video’s strong partner base that includes the likes of Atlassian, ServiceNow (NOW - Free Report) and Dropbox is also expected to have benefited the company in winning customers in the fiscal second quarter.

Additionally, this Zacks Rank #2 (Buy) company’s expanding international footprint is a major driver. During the quarter, Zoom Video announced plans to expand its presence in India by opening a new technology center in Bangalore. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

However, Zoom Video continues to face substantial competition from the likes of Cisco (CSCO - Free Report) , Microsoft (MSFT - Free Report) and Google Meet.

Notably, Cisco’s Webex witnessed double-digit growth in fourth-quarter fiscal 2020. Microsoft Teams also gained traction from a substantial spike in the usage rate. In its fourth-quarter fiscal 2020 conference call, the company stated that “69 organizations now have more than 100,000 users of Teams, and over 1800 organizations have more than 10,000 users of Teams.”

The intensified competition is expected to have deterred Zoom Video’s subscriber growth on a sequential basis. Moreover, increased sales & marketing expenses are likely to have drained profitability in the to-be-reported quarter.

Key Q2 Developments

On Jul 7, Zoom Video announced the launch of Zoom Hardware as a Service (“HaaS”) that will make Zoom Rooms and Zoom Phone more accessible by minimizing friction around hardware procurement. Customers can choose from a variety of solutions from leading hardware manufacturers DTEN, Neat, Poly, and Yealink.

Moreover, Zoom Video and ServiceNow announced a commitment to use each other’s technology solutions to make work-from-anywhere experience better. Zoom Video is using ServiceNow’s Customer Service Management to scale its customer-service operations. It will also deploy the Now Platform, including new AIOps capabilities, to enable its new HaaS business model. Zoom will also expand its implementation of ServiceNow’s CSM to provide HaaS customer support.

Meanwhile, ServiceNow has been using Zoom Video for remote working. The company now plans to replace its legacy hardware phone system with Zoom Phone.

These Stocks Are Poised to Soar Past the Pandemic

The COVID-19 outbreak has shifted consumer behavior dramatically, and a handful of high-tech companies have stepped up to keep America running. Right now, investors in these companies have a shot at serious profits. For example, Zoom jumped 108.5% in less than 4 months while most other stocks were sinking.

Our research shows that 5 cutting-edge stocks could skyrocket from the exponential increase in demand for “stay at home” technologies. This could be one of the biggest buying opportunities of this decade, especially for those who get in early.

See the 5 high-tech stocks now>>

Published in