Why Is Zoom’s Stock Dropping?
Stock Market Analysis

Zoom Smashes Earnings As Work-From-Home Becomes The New Normal

Zoom’s quarterly sales surge 369% as the software company cements itself as the ultimate remote working tool. 

Zoom’s (NASDAQ: ZM) rocket ride to the moon resumed yesterday, with the video conferencing company reporting booming revenue and strong guidance for 2021. Shares of the company jumped more than 10% after-hours when it reported fiscal fourth-quarter earnings and guidance that were stronger than analysts had expected.

Zoom became a lifeline for those stuck at home during the pandemic as work and teaching turned to remote tools to help individuals stay connected. A remote living atmosphere became paramount for survival and as we edge close to lockdown’s one-year anniversary, remote working doesn’t seem to be going anywhere yet. This helped the company edge close to adjusted profits of almost $1 billion last year after only clearing $101.3 million in 2019 — a massive milestone for the tech company. 

Zoom CEO Eric Yuan proudly stated: 

“We are humbled by our role as a trusted partner and an engine for the modern work-from-anywhere environment. Our ability to rapidly respond and execute drove strong financial results throughout the year.” 

The Californian-based company reported the following in Zoom’s fourth-quarter earnings release: 

  • Adjusted earnings of $1.22 per share, versus $0.79 expected by analysts. 
  • Revenue of $882.5 million versus $811.8 million estimated — up 369% year-over-year (YoY).
  • Adjusted operating income for one-off items of $360.9 million, up 839% YoY. 
  • Operating cash flow of $399.4 million, up 993% YoY. 
  • 467,100 customers who have over 10 employees at the end of the quarter, up 470% on an annualized basis, compared with 354% growth in the previous quarter. 
  • $4.24 billion in cash, cash equivalents and marketable securities, up from $1.87 billion in Q3. 
  • Over 1 million paying seats for its new virtual call service, Zoom Phone. 

Zoom announces strong guidance for 2021

Zoom issued robust growth for the fiscal first quarter, including between $0.95 to $0.97 per share in adjusted earnings on $900 million to $905 million in revenue, which would represent growth of 175% year-over-year. Wall Street had only expected $0.72 on $829.2 million in revenue for the current quarter. 

For the full fiscal year, the software company forecast for earnings of $3.65 per share and $3.78 billion in revenue, representing 42% growth. This again beat expectations for the coming year as analysts were only looking for $2.96 per share on revenue of $3.56 billion. 

The future of Zoom 

Workers and students are expected to return to their physical spaces as soon as vaccines are administered at a large scale and as global supplies grow and the spread of the virus slows, some Zoom investors are getting worried. However, there has been a stack of recent reports showing that many workers do not want to return to the office full-time and would prefer a more flexible approach to working. It seems like the coronavirus pandemic might have had a lasting impact on work life, one that Zoom can really benefit from as a teleworking business provider. 

Whether the work-from-home trend will prove resilient enough for Zoom to continue its astronomical growth still remains to be seen. However, as huge multinational companies like Spotify, Salesforce, and Twitter announce flexible remote working policies indefinitely, it’s looking like remote working could be the new normal for workforces around the world.

To virus-proof its business, Zoom has recently been announcing new features for hybrid workforce models. These additions include a feature that allows users to pair a Zoom Room with their mobile and use the Zoom Rooms Controller app to start or join a meeting, a virtual receptionist, a Zoom Rooms Appliance Neat Bar which allows users to monitor air quality, humidity, and CO₂ levels, and a way for people to count how many people are in a room by using cameras. 

Zoom stock has risen over 262% over the past year, while the S&P 500 is up only 26% in the same period. 

A MyWallSt subscription gives you access to over 100 market-beating stock picks and the research to back them up. Our analyst team post daily insights, subscriber-only podcasts and the headlines that move the market. Get your free trial now!   


MyWallSt operates a full disclosure policy. MyWallSt staff currently holds long positions in companies mentioned above. Read our full disclosure policy here

Nicole Byrne
Nicole is a writer here at MyWallSt. Her favorite stock is Etsy because she loves its original and handmade items. She believes people are going to stop buying mass-produced items and start purchasing ‘one of a kind’ fashions and furnishings. In a world of sameness, Etsy has the advantage.