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Zoom Video (ZM) to Report Q3 Earnings: What's in Store?

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Zoom Video (ZM - Free Report) is set to report third-quarter fiscal 2021 results on Nov 30.

For the quarter, the company expects non-GAAP earnings between 73 cents and 74 cents per share. Total revenues are expected between $685 million and $690 million.

The Zacks Consensus Estimate for earnings stayed at 75 cents per share over the past 30 days. The company had reported earnings of 9 cents per share in the year-ago quarter.

The consensus mark for revenues is pegged at $694.5 million, suggesting 316.9% growth from the figure reported in the year-ago quarter.

Zoom Video’s earnings beat the Zacks Consensus Estimate in all of the past four quarters, the average surprise being 129.7%.

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

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

Factors to Watch

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

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 twelve-month basis was more than 130% in second-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. Markedly, during the quarter, Zoom Video announced the expansion of Zoom for Home to smart displays including Amazon Echo Show, Portal from Facebook (FB - Free Report) , and Google Nest Hub Max.

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.

In fact, in fiscal second quarter, subscription provided to new customers accounted for 81% of the top-line growth (355% year over year). The trend is expected to have continued in the to-be-reported quarter.

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  fiscal second quarter.

Additionally, this Zacks Rank #3 (Hold) company’s expanding international footprint is a major driver. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

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

Key Q3 Developments

During the reported quarter, Zoom Video announced general availability of its Zoom Phone cloud phone service in 25 additional countries and territories. Zoom now provides local telephone service and domestic calling in over 40 countries and territories around the world.

Moreover, Zoom Video announced that Cardinal Health selected its UCaaS platform to consolidate and optimize workflow. The initial rollout includes more than 17,000 Zoom users including video webinar, rooms, cloud-room connectors and phone licenses.

Further, Zoom Video unveiled the new end-to-end encryption (E2EE) that ensures encrypted communication between meeting participants. With E2EE, no third party, including Zoom Video, is provided access to the meeting’s private keys. The company also unveiled Zapps, a way to integrate third-party applications with its virtual meeting experience. It also introduced OnZoom (still in the beta phase), a platform for free and paid live events

On Oct 26, Zoom Video announced the availability of its new E2EE to global users, both free and paid, for meetings with up to 200 participants.

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