Zoom Video Communication (NASDAQ:ZM) performed exceptionally in the first quarter of 2020 but competition might be growing. Following the good performance, the management increased its full-year guidance outlook.
Zoom posted exceptional results in Q1
The exceptional performance was something expected as more people sought to remote working and meeting due to COVID-19 restrictions. In April the company indicated that daily meeting participants had surpassed 300 million which is a massive increase for 10 million at the end of last year.
The company posted YoY revenue increase of169% to $328 million in the quarter exceeding management’s guidance range of $199 million to $201 million. Zoom also saw growth of new clients with those with over 10 employees growing 354% YoY to 265,000.
Interestingly this exceptional performance is attributable to the lockdown measures in most countries. The company’s CFO Kelly Steckelberg stated that they expect a high churn rate because small enterprises went for monthly plans due to the crisis. The company expects this demand to diminish once the situation normalizes and restrictions are lifted.
For the full year, the company has changed its guidance outlook range to $1.775 billion to $1.8 billion from $905 million to $915 million. Operating income is expected to be around $355 million to $389 million will be Non-GAAP earnings per share will range from $1.21 to $1.29 per share.
Growing competition
Zoom has however faced criticism regarding privacy and security issues but it has been enhancing its security. The company also faces competition from the likes of Facebook Inc. (NASDAQ:FB) which recently launched Facebook Rooms, Microsoft Corp’s (NASDAQ:MSFT) Skype and Teams as well as Google’s (NASDAQ:GOOGL) software solution Meet free. However, the company will continue focusing on video communications instead of a unified communication solution. It still depends on Slack Technologies and Box for the chat and file-sharing functionalities which could work to its disadvantage should the third parties decides to develop their video communication platform.
