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Stock Market Analysis

Zoom Smashes Expectations In Its Q2 Earnings

The teleconferencing software leader has had its problems in 2020, but making money and gaining users has certainly not been one of them

Travel, event management, restaurants, and many more industries are suffering badly during this awful pandemic, but Zoom’s (NASDAQ: ZM) omnipresence during these trying times has all-but secured its longevity. If further evidence of this was needed following its 169% revenue jump in Q1 this year, Q2’s numbers put those figures to shame. 

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Zoom’s Q2 in numbers

There’s a reason that Zoom’s stock price is soaring as much as 25% pre-market on Tuesday morning and it’s because the company made as much money in three months as it did in all of 2019. Here are the numbers behind that marvelous run:

  • Earnings per share (EPS) came in at $0.92, more than twice what analyst estimates anticipated at $0.45
  • Revenue soared to a record of $663.5 million in the quarter, a 32.5% surprise versus the $500.5 million expected on Wall Street. 
  • Revenue grew a whopping 355% year-over-year. 
  • New customers’ subscriptions delivered 81% of the revenue growth, and there was less customer churn than expected.
  • Zoom’s net income neared $186 million, up from just $5.5 million in the year-ago quarter.
  • The company’s adjusted gross margin increased to 72.3% from 69.4% one quarter earlier partly because of expanding the capacity of its own data center equipment.
  • Finally, Zoom averaged 148.4 million monthly active users for Q2, up 4,700% year-over-year.

Excluding what is expected to be an impressive market performance today, Zoom’s stock is up roughly 369% year-to-date (YTD). 

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Zoom’s Q3 and full-year guidance 

Zoom’s guidance was just as impressive as its earnings, with the company predicting fiscal third-quarter earnings of $0.73 to $0.74 per share on an adjusted basis and revenue of $685 million to $690 million. This far surpasses the Wall Street consensus of $0.35 per share on $492.9 million in revenue. 

Full-year guidance was also raised by Zoom to between $2.40 and $2.47 in adjusted EPS on revenue of between $2.37 billion and $2.39 billion, suggesting annual revenue growth of 282% in the middle of the range. Analyst estimates put the company’s EPS in the range of $1.30 to $1.60 on revenue of between $1.81 billion and $1.86 billion. 

What’s next for Zoom?

The elephant in the room of ‘reasons why Zoom stock is skyrocketing’ is, of course, COVID-19. What happens if a vaccine is found and things go back to ‘normal’?

Well, with no vaccine in sight and winter just around the corner, I can’t see the millions of offices around the world opening back up fully any time soon. The likes of Twitter, Pinterest, and Facebook have already stated that workers can now work from home forever if they wish. 

Recent surveys from globalworkplaceanalytics.com estimate that 68% of global work-from-home employers are very successful in their new surroundings, while 76% of global employees wish to remain working from home for at least an average of 2.5 days per week. With over half of U.S. employees (56%; 75 million workers) holding jobs and having responsibilities that could be performed, at least in part, from home, it is unlikely that we will ever go fully back to the way things were. 

Working remotely is here to stay, and Zoom is at the forefront of this revolution, having stamped down its authority against even the likes of Google and Microsoft. Likewise, If Apple can grow in value from $1 trillion to $2 trillion in lockdown, and that is with a very mature customer base and highly penetrated market share, how far can Zoom, an absolute necessity in modern society, rise?


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

Jamie Adams
Jamie Adams
Jamie is the Content Editor here at MyWallSt. His favorite stock is Apple, which is also the first stock he ever bought. Jamie is not only a big fan of its products, but he believes that the tech giant has a whole lot more to give the world, and hasn't even scraped the surface of its potential.