Zoom revenue soared 326% in 2020. Can it stay ahead this year?

It shows how far the company has come since the beginning of the pandemic that made working from home a staple for millions of people around the world.
2 March 2021

Zoom revenue soared 326% in 2020. Can it stay ahead this year? Source: Shutterstock

  • in 2020, Zoom recorded a quadrupled revenue of US$2.65 billion.
  • Its fourth-quarter revenue alone soared by 369%.
  • The video conferencing company’s revenue this year is expected to rise more than 41% to between US$900 million and US$905 million.

Being the perfect product available at the idea time, 2020 was indeed a banner year for Zoom Video Communications Inc. The pandemic-influenced gains made Zoom a household name among users and investors, pushing its revenue up by four-fold to US$2.65 billion in the fiscal year ended in January. Assuming that working from home is no longer a staple for millions of people towards the end of 2020 as to how it was at the beginning of the Covid-19 pandemic, Zoom’s revenue still soared by 369% in the last quarter to US$882.5 million, bigger than the entire financial year of 2020. As a result, its market cap increased five-fold to US$100 billion.

However, worries about what Zoom’s business will look like once the pandemic ebbs are still hanging over the company of late. While the pandemic has made for trying business circumstances, Zoom Chief Executive Eric Yuan said it has made it “one of the most popular apps of the year”. He also said the fourth quarter marked a strong finish to an unprecedented year for Zoom. “As the world emerges from the pandemic, our work has only begun,” he added.

The company’s customer base also increased that too by 470% YoY to 467,100 on the back of more than 10 employees. Of those, 1,644 contributed more than US$100,000 in trailing 12 months revenue, up 156%. It also reported a trailing 12-month net dollar expansion rate in customers with more than 10 employees of 130%. Overall, these customers accounted for about 80% of its incremental revenue, up from 59% one year ago. 

How will 2021 fare for Zoom?

The nine-year-old company has become synonymous with video conferencing during the pandemic and despite the talks surrounding ‘Zoom fatigue’, Covid-19 is continuing to spread and traditional office life is still on hold for many.

Zoom is expecting sales to rise more than 40% this year, reaching more than US$3.7 billion and although it did not expect growth to continue at the pace it enjoyed last year, the company said so far business remains strong. The company also expects the shift to continue well into 2021 with revenue in the first three months of this year is expected to be between US$900 million and US$905 million, well above analysts’ estimates.

On where the future growth will come from, Zoom stressed the potential of its two-year-old Zoom Phone product, which is a simple and straightforward cloud-calling service without video calls. It was pointed out that Zoom Phone was the company’s fastest-growing product on a quarter-over-quarter basis in Q4. They said it ended the year with 10,700 Zoom Phone customers with more than 10 employees, up 269% YoY.

The company may also have other options to grow its business though, as it’s rumored to be trying to expand its presence in the overall productivity market such as a web-based email service to compete with Gmail and Outlook, as well as a Calendar service. The company may also be able to extract some revenue from a new product called OnZoom that debuted in October.

Hargreaves Lansdown analyst Susannah Street said, Zoom’s fate would depend on how it manages to compete against firms such as Microsoft and Google, which have introduced similar features. “Although it stole an early march on other players in the first few months of the crisis, it does now have much stiffer competition from the likes of Microsoft and Google who have significantly upped their game,” she wrote in a research note.

“It may be that we have become so used to pandemic habits that we will stick with our virtual social lives, particularly for long-distance friendships and work relationships. But just how large a slice of the live video pie Zoom manages to hang on to will depend on how it matches up to its powerful rivals,” she added.