Zoom Stock Surges as Quarterly Earnings Smash Estimates

Zoom Video Communications Inc. reported quarterly sales that leapfrogged estimates, showing that a surge in demand for its video-conference service during the coronavirus pandemic has translated into more paying customers. The company also about doubled its annual revenue forecast.

Revenue increased about 170% to $328.2 million in the period that ended April 30, the San Jose, California-based company said Tuesday in a statement. Analysts, on average, expected $203 million, according to data compiled by Bloomberg. Profit, excluding some items, was 20 cents a share, compared with analysts’ average projection of 9 cents.

Zoom projected sales of as much as $1.8 billion in the fiscal year, from a forecast of as much as $915 million in early March. Analysts estimated $930.8 million.

Chief Executive Officer Eric Yuan has tried to ensure that his virtual-meeting platform can cope with a swell of demand from people forced to remain home to prevent the spread of Covid-19. While security and privacy issues plagued the system early in the quarantine, Zoom has become an essential social network, attracting more than 300 million participants some days, up from 10 million in December. The software maker allows gatherings of as long as 40 minutes for no charge. While Zoom has attracted more buzz than corporate rivals, its ability to attract more paying customers will determine how well it’s faring against competition from Microsoft Corp., Cisco Systems Inc. and Alphabet Inc.’s Google.

Shares increased 4% in extended trading after closing at a record $208.08 in New York. The stock has more than tripled this year.

Zoom said it ended the quarter with about 265,400 customers with more than 10 employees, a more than fourfold increase from the same period a year earlier. The company now has 769 corporate clients that have spent more than $100,000 on Zoom’s products over the last 12 months, about double from a year earlier.

The company said its expects adjusted profit in the fiscal year will be $355 million to $380 million, or $1.21 to $1.29 a share. Analysts had estimated 46 cents, just more than Zoom’s earlier forecast. The company has been spending to bolster its network capacity, including by buying cloud-computing services from Oracle Corp. during the pandemic. Zoom also continues to use Amazon.com Inc.’s cloud service.

With Zoom’s popularity has come controversy over the company’s security practices. Trolls have invaded myriad meetings, religious gatherings and other events, to share pornography and shout profanity or racial epithets, in a phenomenon known as “Zoombombing.” The company highlighted or created a raft of tools users can employ to prevent the virtual attacks, including passwords and waiting rooms.

There also were instances when Zoom calls were routed through servers in China even when no participant was based there and users were unwittingly sending metadata to Facebook Inc. when they signed in. Zoom put an end to both practices. The company pledged to commit to bolstering privacy over all other concerns for three months, purchasing a secure-messaging company, Keybase, to bring the highest standard of encryption to the platform, and hiring cybersecurity experts to guide safety efforts.

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