Few companies have become more widely known during the COVID-19 pandemic than Zoom Video Communications Inc., and its first quarter financial numbers reflect its incredible surge in popularity.

The company, which sells videoconferencing tools, crushed Wall Street’s estimates, reporting a profit before certain costs such as stock compensation of 9 cents per share on revenue of $328.2 million, up 169% from a year ago. Wall Street had been expecting a 9-cent-per-share on revenue of just $202.48 million.

In a statement, Zoom Chief Executive Eric Yuan (pictured) said he had been humbled by the massive adoption of its services around the world, as workers use the company’s tools to collaborate and relatives to stay connected.

“The COVID-19 crisis has driven higher demand for distributed, face-to-face interactions and collaboration using Zoom,” Yuan said. “Use cases have grown rapidly as people integrated Zoom into their work, learning, and personal lives.”

Yuan said the company ended the quarter with 265,400 paying customers that have more than 10 employees. In addition, he spoke of an “unprecedented number of free participants” that could lead to upselling opportunities later.

The good times are unlikely to end soon as the company also issued second-quarter guidance that blew away Wall Street’s forecasts. For the next three-month period, Zoom is projecting a profit of between 44 cents and 46 cents per share on revenue of $495 million to $500 million. In contrast, Wall Street had forecast earnings of just 11 cents per share on revenue of $223.8 billion.

For its full fiscal year 2021, Zoom said it expects revenue to top $1.77 billion, well ahead of Wall Street’s forecast of $935.2 million.

Zoom’s stock was down 1.5% in after-hours trading, though it has gained more than 200% since the beginning of the year.

In a conference call with analysts, Yuan said that Zoom had seen elevated levels of usage even as stay-at-home restrictions across the world begin to ease.

The world has changed dramatically since Zoom last reported earnings in March, with the COVID-19 pandemic massively accelerating the move to remote work. Zoom, which didn’t even mention the coronavirus during its last earnings call, has suddenly found itself in the position of being one of those few companies that became a verb. People don’t Skype anymore, and they never WebEx or Microsoft Teams or Google Meet. Instead they “Zoom” whenever it’s time for a face-to-face chat.

Analyst Charles King of Pund-IT Inc. told SiliconANGLE that Zoom is an interesting and timely example of a company being in exactly the right place at the right time, even if those times are troubled ones for many of its users.

“To paraphrase Aretha Franklin, who isn’t Zooming who?” King said. “The massive jump in revenue and earnings isn’t hugely surprising, given the word of mouth the company has enjoyed in 2020. Plus, I’m not particularly surprised by the bullish guidance that Zoom’s leadership provided.”

Still, Zoom cannot afford to rest on its laurels, another analyst, Holger Mueller of Constellation Research Inc., told SiliconANGLE.

“Zoom has to make good on its security commitments and then needs to find advanced and better ways to conduct meetings, webcasts, collaboration with business applications and more,” Mueller said. “But for now congrats to Zoom for being a critical if not essential tool during the Covid-19 pandemic.”

Yuan told analysts that Zoom owed a lot of thanks to partners such as Amazon Web Services Inc., which was able to provision the majority of the new service it needed when its data centers suddenly found themselves overwhelmed by traffic surges.

“Immediately during the crisis, our long-time partner, AWS and its CEO, Andy Jassy, enabled us to meet this rapidly increasing demand,” Yuan said. “As our demand increased and we had limited visibility into the growth, AWS was able to respond quickly by provisioning the majority of the new service we needed.”

Zoom also relied on Oracle Corp. for more support during the quarter, Yuan said.

The increased demand and the additional cloud costs did, however, hurt Zoom’s gross margins, Chief Financial Officer Kelly Steckelberg said in the call.

“Non-GAAP gross margin for the first quarter was 69.4% compared to 80.9% in Q1 last year and 84.2% last quarter,” Steckelberg said. “Although in early March, we originally guided lower based on an increase in usage of our platform. Our gross margin was further impacted by the elevated demand, especially higher levels of free meeting minutes, including those from K-12 schools in March and April.”

Steckelberg told analysts Zoom is planning to add more capacity to its data centers. The company also aims to gain efficiencies and likely bring gross margins back to the mid-70% range in the next several quarters.

Photo: Vitor Oliveira/Flickr