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Zoom Video (ZM) to Report Q1 Earnings: What's in Store?

Zacks Equity Research

Zoom Video ZM is set to report first-quarter fiscal 2021 results on Jun 2.

For the quarter, the company expects non-GAAP earnings to be 10 cents per share. Total revenues are expected between $199 million and $201 million.

The Zacks Consensus Estimate for earnings stayed at 10 cents per share over the past 30 days. The company had reported earnings of 3 cents per share in the year-ago quarter.

The consensus mark for revenues is pegged at $203 million, suggesting 66.4% growth from the figure reported in the year-ago quarter.

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

Factors to Watch

Zoom Video’s fiscal first 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. Notably, net dollar expansion rate on a trailing twelve-month (TTM) basis was more than 130% in fourth-quarter fiscal 2020. 

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.

Zoom Video’s strong partner base that includes the likes of Atlassian TEAM and Dropbox is also expected to have benefited the company in winning customers in the fiscal first quarter.

Additionally, this Zacks Rank #3 (Hold) company’s expanding international footprint is a major driver. Earlier in March, Zoom Video announced the availability of its Zoom Phone cloud service in 11 additional countries (total 17 countries and one territory). 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 and Microsoft MSFT.

Notably, Cisco’s Webex witnessed significant usage growth with more than 500 million meeting participants generating 25 billion meeting minutes in April, which is more than triple the volume in February. Free trials of Webex are expected to have driven its user base rapidly.

Microsoft Teams also gained traction from a substantial spike in the usage rate as daily active users crossed the 75-million mark.

The intensified competition along with the usage ban by companies like Tesla is expected to have deterred Zoom Video’s top-line growth. Moreover, increased sales & marketing expenses are likely to have drained profitability in the to-be-reported quarter.

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