Key Takeaways

  • Analysts estimate adjusted EPS of $0.97 vs. $0.20 in Q1 FY 2021.
  • The number of large-contract customers contributing over $100,000 in revenue annually is expected to rise YOY.
  • Revenue is expected to rise at a robust pace, but slower than recent quarters as the economy recovers from the COVID-19 pandemic.

Zoom Video Communications Inc. (ZM) has expanded dramatically over the past year, becoming the go-to video conferencing platform for the remote work economy amid the COVID-19 pandemic. But as vaccines roll out and the economy stages a recovery, Zoom is looking for new ways to keep its customer base growing. One example is Zoom Events, a new platform that allows businesses to host interactive and engaging virtual events. It was announced in mid-March and is scheduled to launch this summer.

Investors will be watching to see if the company has maintained its rapid pace of growth when it reports earnings on June 1, 2021 for Q1 FY 2022. Zoom's fiscal year (FY) ends January 31. Analysts expect both adjusted earnings per share (EPS) and revenue to rise at a rapid pace year over year (YOY), albeit at much slower paces than in recent quarters.

Investors will also focus on the number of Zoom's large-contract customers who contribute over $100,000 in 12-month trailing (TTM) revenue. These customers tend to be large enterprises that are less likely to switch to a new video-conferencing platform. Zoom expects these customers to provide a more stable source of revenue in the post-pandemic world. Analysts estimate continued YOY growth in Zoom's total number of these $100,000 in TTM revenue customers.

Shares of Zoom have outperformed the broader market over the past year. The stock's performance gap widened significantly beginning in late August of last year and soared to a peak in mid-October. It trended downward until several weeks ago, but has begun to advance again. Zoom's shares have provided a total return of 102.7% over the past year, well above the S&P 500's total return of 38.8%.

One Year Total Return for S&P 500 and Zoom
Source: TradingView.

Zoom Earnings History

Zoom's stock dropped following the release of its Q4 FY 2021 earnings release at the beginning of March. Adjusted EPS rose 723.8%, a torrid pace but still a slowdown from the previous two quarters. Revenue expanded 368.8%, the fastest quarterly pace in at least the past three years. The company's financial results continued to benefit from the shift to remote work and distance schooling amid the pandemic.

In Q3 FY 2021, Zoom's adjusted EPS increased 1,055.8%, the fastest pace since Q1 FY 2020. Revenue rose 366.5% compared to the year-ago quarter, marking the fastest pace of growth since at least Q1 FY 2019. The company said that revenue was driven by the addition of new customers and the expansion of business across existing customers.

Analysts expect adjusted EPS and revenue to continue expanding in Q1 FY 2022, but at a slower pace than in previous quarters. Adjusted EPS is forecast to rise 390.0% as revenue increases 175.7%. For full-year FY 2022, analysts expect adjusted EPS to rise 9.8%, a drastic slowdown from last year's rise of 863.6%. Revenue is forecast to grow 43.0%, also much slower than last year's 325.8% increase.

Zoom Key Stats
  Estimate for Q1 2022 (FY) Q1 2021 (FY) Q1 2020 (FY)
Adjusted Earnings Per Share ($) 0.97 0.20 0.03
Revenue ($M) 904.8 328.2 122.0
Customers Contributing Over $100K in 12-month Trailing Revenue 1,812 769 405

Source: Visible Alpha

The Key Metric

As mentioned above, investors will also be watching the number of customers contributing over $100,000 in TTM revenue over the previous 12 months. The size of this customer group provides a measure of two key capabilities: Zoom's ability to scale its offerings to its users' needs, and the company's ability to attract larger organizations to its platform. Large customers are likely to be a more stable source of revenue compared to individuals or smaller organizations who may switch more frequently to other video conferencing services. Securing contracts with large enterprises will be especially important as the global economy emerges from the pandemic and as many people begin returning to their company offices to work.

The number of customers contributing more than $100,000 in TTM revenue has been growing steadily for several years. Their number stood at 344 at the end of FY 2019. By the end of FY 2021, it had risen nearly five-fold to 1,644. Analysts expect that number to rise 135.6% in Q1 FY 2022 compared to the year-ago quarter. For full-year FY 2022, the number of customers contributing more than $100,000 in TTM revenue is expected to increase to 2,257, more than 6.5 times larger than at the end of FY 2019.