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What to expect when Zoom Video issues its second earnings report after IPO

Zoom Video Communications (NASDAQ: ZM) is preparing to publish its second earnings report as a public company, after posting impressive results for the first quarter. The July-quarter results will be released Thursday at 4:15 pm ET.

Zoom Video Communications (ZM) Q1 2020 revenue more than doubles

The San Jose, California-based tech firm, which is a leading provider of video and audio conferencing services, continues to expand its customer base. The response to its ‘video-first unified communications platform’ called Zoom Rooms has been overwhelming. The efforts to add additional features to the platform through strategic investments and partnerships with leading tech firms have already started yielding results.

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Like in the case of all newly listed companies, the growth initiatives would result in a spike in expenses, which in turn puts pressure on margins. Also, the increased volatility in the stock’s performance ahead of the announcement can be a cause for concern. However, Zoom Video’s impressive valuation and steady operational improvements are enough reasons for investors to be optimistic about its prospects in the long run. 

Zoom Video Communications (ZM) had about 50,800 large customers in FY19

Nevertheless, the upcoming quarterly report will be a litmus test for its future performance as a publicly listed company. The management expects to sustain the recent top-line growth and looks to achieve 60% revenue growth in fiscal 2020. When it comes to long-term profitability, a lot will depend on how aggressively the company invests in expansion initiatives outside the US.

After reporting a modest turnaround in the first quarter of 2020, the management expressed hope of staying in the positive territory in the second quarter too. It is looking for earnings in the range of $0.01 per share to $0.02 per share, which is slightly above analysts’ forecast of $0.01 per share earnings on revenues of $130.31 million.

Related: Zoom Video Q1 2020 Earnings Call Transcript

Zoom reported adjusted earnings of $0.03 per share for the first quarter of 2020, marking an improvement from the $0.02 per share loss reported in the year-ago quarter. The bottom-line also came in above analysts’ forecast. Revenues more than doubled to $122 million, spurring a stock rally.

Since going public in mid-April, Zoom Video’s shares have gained 48%. After the first-quarter results were published, the stock had made strong gains and crossed the $100-mark, but retreated later.

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