Zoom Video Communications, Inc, the company behind the Zoom video conferencing service which rose to great popularity amid the COVID-19 pandemic, announced its financial results of third quarter fiscal year 2021 on Monday. The company has reported significant growth, but the gross profit margin numbers are lower than what analysts had estimated.
The published results are of the third fiscal quarter which ended on October 31, 2020. Zoom has reported $777.2 million in gross revenue, which is up 367% year-over-year. The GAAP income from operations was $192.2 million, compared to GAAP loss from operations of $1.7 million last year.
The company has reported a gross profit of $518 million, compared to last year’s $135.7 million. The gross profit margins of the company have fallen to 66.7% from the analysts’ estimate of 72.1%, and its pre-pandemic margin average of about 80%.
This is largely being attributed to the sudden increase in free users of the service, which led to increased cloud infrastructure costs for the company and relatively lower profits. Although Zoom has its own data centers, it still relies on third-party cloud services offered by the likes Amazon and Oracle, in order to rapidly expand its cloud infrastructure whenever necessary. A sudden increase in user base means an increase in cloud infrastructure costs.
The company reported GAAP net income of $198.4 million, or $0.66 per share compared to previous year’s $2.2 million, or $0.01 per share. The company also provided positive forecasts for the fourth quarter and also for the full fiscal year 2021.
“Strong demand and execution led to revenue growth of 367% year-over-year with solid growth in non-GAAP operating income and cash flow in our third fiscal quarter. We expect to strengthen our market position as we finish the fiscal year with an increased total revenue outlook of approximately $2.575 billion to $2.580 billion for fiscal year 2021, or approximately 314% increase year-over-year,” said Zoom founder and CEO, Eric S. Yuan.
The Zoom video conferencing software rose to prominence when countries all over the world went into lockdowns at the start of the pandemic, forcing companies and schools to operate remotely. The demand for video conferencing services like Zoom has since skyrocketed, and appears to be on a steady rise. According to Zoom’s customer metrics, the company approximately had 433,700 customers with more than 10 employees in the third quarter, up 485% year-over-year.
Despite the significant increase in revenue and a positive outlook provided by the company for the fourth quarter and the full fiscal year, Zoom’s shares fell 5% after the market closed.
