Zoom Q2 Earnings Exceed Expectations But Growth Forecast Disappoints Investors

Zoom Q2 earnings report marks its first billion-dollar revenue quarter, but the company signaled a faster-than-expected easing in demand for its video-conferencing service after a pandemic-driven boom, which sent its shares tumbling 11 percent.

Video teleconferencing service Zoom Q2 earnings report marks its first billion-dollar revenue quarter, but the company signaled a faster-than-expected easing in demand for its video-conferencing service after a pandemic-driven boom, which sent its shares tumbling 11 percent.

Billion-dollar revenue for Zoom's second quarter, a key metric to the company, is driven by recurring monthly recurring revenue, or MRR, which accounted for 91 percent of Zoom's total Q2 revenue, excluding one-time items.

The milestone came despite two separate rounds of layoffs at the company, with 2,000 layoffs last year that were followed by 400 more layoffs in January. More layoffs are expected as the company readies for its first publicly traded offering this fall.

The company signaled a faster-than-expected easing in demand for its video-conferencing service after a pandemic-driven boom, which sent its shares tumbling 11 percent on the day of the report.

At the time of this writing, the Zoom shares are trading at $35.17, up 0.21 percent for the day. The last stock price of $35.18 represents a gain of 1.4 percent. Shares are down about 15 percent from their 52-week high of $39.95, reached in early January.

"The Q2 2019 results reflect our continued focus on customer success and the momentum of our product and services, while also reflecting the continued transformation of our business," CEO Eric Yuan said in the earnings report. "We are extremely pleased with our performance in Q2 2019 and have confidence in the trajectory of our business."

Zoom raised $1.2 billion in equity and debt in its private stock offering earlier this year and now plans to hold its initial public offering (IPO) at the end of the year.

The company noted that it was a record quarter for both MRR and revenue, while users reached an all-time high. Zoom also announced more than 4,000 new users signing up for its service daily.

The company's revenue growth came from a boost in paid subscriptions and active users, but Zoom also saw declining average revenue per user (ARPU) from the $45 range in 2018 to $36 in the first quarter of this year.

Zoom's total user count remained steady at 200 million, as does its daily active user (DAU) number at 1.5 million. But its daily active user count reached an all-time high of 5 million in the second quarter, as Zoom says its average revenue per user (ARPU) growth also hit an all-time high of 13.5 percent.

 

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