A new normal for Zoom Video Communications isn’t quite here. But a preview the company gave with its latest results doesn’t look half bad.
Worries about what Zoom’s business will look like once the pandemic ebbs have been hanging over the company of late. Zoom’s share price has lost about 18% since news of the first major vaccine breakthrough in early November—a sharp contrast to the BVP Nasdaq Emerging Cloud Index that has gained that much in the same time. Some of that is a natural correction; Zoom’s share price had surged 635% from the first of the year up to that point. But the prospect of normal life returning over the next few months still posed a major unknown for a company that went from a Silicon Valley upstart to a household name in a matter of weeks.
The company’s fiscal fourth-quarter results posted Monday afternoon should soothe some of those worries. Revenue surged more than fourfold to $882.5 million. That makes for the third consecutive quarter of growth exceeding 300% on an on-year basis. It is also the last quarter that Zoom’s business will compare to a pre-pandemic period. But the company also projected 175% growth for the quarter ending in April, well ahead of Wall Street’s projections. Zoom also guided for 42% to 43% growth for the fiscal year ending January 2022—ahead of the 35% analysts had forecast. Zoom’s share price jumped 9% following the report.
Given the unknown number of users that signed up just to keep their virtual happy hours from hitting the 45-minute limit, there has been some concern over the stability of Zoom’s revenue base post-pandemic. But Zoom’s enterprise-level business is also soaring; the number of customers paying more than $100,000 a year jumped 156% year over year during the quarter ended January—an acceleration from the prior period. These are customers far more likely to stick around, and possibly buy into new services such as Zoom Phone and Zoom Rooms that will help the company diversify from its core videoconferencing service.
Zoom may still have to grapple with some attrition once normal life returns in full. And the stock is expensive at 35 times forward sales even with the recent weakness. But a world with fewer Zoom happy hours can still be a good one for Zoom so long as it can keep its biggest customers smiling.
