Zoom Video Communications Inc (ZM.O) forecasted higher-than-expected revenue for the quarter on Tuesday, as the company’s increasing adoption of mixed work models is expected to drive steady demand for its video conferencing tools.
In the past year, as companies and schools turned to their virtual courses, office meetings and social services, Zoom became a household name and a favorite of investors.
But with the rapid development of vaccination work and the slow return of life to normal, analysts are skeptical about the sustainability of Zoom’s growth, especially when competitors Microsoft, Cisco, and Google follow closely behind.
“The extent to which Zoom can compete sustainably with the likes of Cisco and Microsoft remains to be seen over the next few quarters as we begin to enter true COVID comparable quarters,” said Joe McCormack, senior analyst at Third Bridge.
However, the San Jose, California-based company assuaged some of those concerns by forecasting current-quarter revenue in the range of $985 million to $990 million, above Wall Street’s estimate of $931.8 million, according to IBES Refinitiv data.
The company’s share price rose 2% after falling as much as 5% in after-hours trading due to rising costs. In the first quarter ended April 30, costs increased by 155% to $265 million.
The surge in the number of free users on the Zoom platform has led to increased costs for the company, which operates some of its own data centers.
Zoom, which had come under scrutiny for security related issues, is shifting focus on its two-year-old cloud-calling product Zoom Phone and conference-hosting product Zoom Rooms as bigger players Facebook and Google amp up their video products.
Zoom posted adjusted profit of $1.32 per share on revenue that nearly tripled to $956.2 million in the quarter, compared with estimates of a profit of 99 cents and $906 million in revenue.