Zoom's stock soars as it reports blockbuster earnings with 355% revenue growth

• Zoom reported 355% revenue growth from a year prior in its second quarter earnings on Monday.
• Zoom's business has grown tremendously this year due to the coronavirus pandemic and the subsequent remote work mandates.
• The second quarter's beat follows Zoom's blockbuster Q1 earnings report in June, when it reported 169% revenue growth from a year prior.

Zoom stock rose roughly 23% after-hours on Monday after its second quarter earnings soared past Wall Street's estimates on both the top and bottom line.

Zoom's business has grown tremendously this year due to the coronavirus pandemic and the subsequent remote work mandates, and its revenue in Q2 grew a stunning 355% from a year prior. The second quarter's beat follows Zoom's blockbuster first quarter earnings report in June, and blows past the 169% year-over-year revenue growth it reported in Q1.

Zoom reported revenue of $663.5 million in its second quarter, much higher than the $500.2 million analysts forecasted. Meanwhile, it reported earnings per share of $0.92, surpassing analyst expectations of $0.45. Zoom also raised its full-year revenue guidance by about $590 million, to between $2.37 billion and $2.39 billion. It previously forecasted between $1.78 billion and $1.80 billion in full-year revenue. The new guidance takes into account the increase in remote work and the likelihood of a higher number of customers paying on a monthly basis in the second half of the year, Zoom said.

Its number of large customers also increased, with 988 customers paying over $100,000 in trailing 12 months revenue. In the first quarter, Zoom reported 769 large customers. CEO Eric Yuan called out new deals with ExxonMobil and Activision Blizzard as new customer wins in a call with analysts. 81% of the revenue growth can be attributed to new customer subscriptions in the quarter, CFO Kelly Steckelberg said on the call.

"Organizations are shifting from addressing their immediate business continuity needs to supporting a future of working anywhere, learning anywhere, and connecting anywhere on Zoom's video-first platform," Yuan said in an earnings release.

Zoom's valuation has surged this year: Even before the earnings on Monday, its stock was up more than 340% for the year to-date.

Still, it hasn't been all good news. After a spat of security blunders in the spring, Zoom faced backlash earlier this summer over its initial plan to only provide end-to-end encryption to paid users. It eventually revised those plans to provide it to all users.

Then, in August, it halted direct sales of its video conferencing products in mainland China, and decided to only offer its technology through a few third-party partners. The decision came as Zoom's surge in popularity has led to scrutiny of its ties to China, though Zoom didn't cite that as the reason for the change. When asked on the earnings call what impact this would have on the company, Yuan said that it has had almost no impact on revenue, and that the decision was tied to simplifying its go-to-market model in China. Zoom also has a large research and development team in the country.

Zoom also brought on some new leaders in the second quarter, including Jason Lee as its new chief information security officer, VMware veteran Velchamy Sankarlingam as its new president of engineering and product, and Damien Hooper-Campbell as its chief diversity officer. Zoom also acquired secure messaging startup Keybase in early May to help it build end-to-end encryption into its product, with cofounder and CEO Max Krohn becoming Zoom's new head of security engineering. Earlier this month it also hired Jeff True as its new general counsel after promoting Aparna Bawa to chief operating officer in May.

In May, it also announced plans to build two new R&D centers in Phoenix and Pittsburgh, to hire a combined 500 new engineers over the next several years. It has also been expanding its hardware offerings, including a new $600 screen dedicated for Zoom calls, and plans to add Zoom capabilities to smart devices like Amazon Echo Shows and Facebook Portals.

Here are the most important numbers:

• Revenue: $663.5 million. Analysts were expecting $500.2 million
• Earnings per share (adjusted): $0.92. Analysts predicted $0.45.
• Revenue (next quarter): $685 million and $690 million. Analysts had predicted $492.8 million.
• Earnings per share (adjusted, next quarter): $0.73 and $0.74. Analysts predicted $0.35.
• Full year revenue: $2.37 billion to $2.39 billion forecasted.
• Customers paying more than $100K in trailing 12 months revenue: 988, up approximately 112% from the same quarter last fiscal year.

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