Zoom Video Q2 preview: Where next for Zoom shares?

Josh Warner
By :  ,  Market Analyst

When will Zoom release Q2 results?

Zoom Video Communications is due to release second quarter earnings on Monday August 30.

Zoom Q2 earnings preview: what to expect from the results

Zoom Video Communications has delivered exponential growth during the pandemic. The shift to remote working caused a surge in demand for its video chat tool. In fact, it booked over 50% more revenue in the last quarter than it did in the entirety of the financial year to the end of January 2020.

Although offices are expected to reopen as vaccination rates improve and restrictions ease, the shift to a more hybrid way of working means the need for digital tools from Zoom and its competitors will remain vital for individuals and businesses.

Analysts are expecting revenue to jump to $991 million in the second quarter from $663.5 million booked the year before. That would also be up sequentially from the record $956.2 million in revenue booked in the first quarter.

Net income is forecast to rise to $245.1 million from $185.7 million, or to $0.80 from $0.63 on a per share basis. Earnings are also expected to improve compared to the first quarter but remain below the record profits booked in the third quarter of 2020.

Other key numbers to watch include its customer metrics. It has continued to see stellar growth in the number of customers with 10 employees or less, which grew 87% in the last quarter to 497,000. That will be closely-watched as some analysts expect growth from smaller businesses to slow over the coming quarters. With that in mind, buoyant growth in the number of larger enterprise customers – defined as those that contribute over $100,000 in trailing 12-month revenue – would prove supportive after jumping 160% in the previous quarter to 1,999. Expectations will remain high for the enterprise segment considering it has delivered an expansion rate of larger customers of over 130% for 12 consecutive quarters.

Guidance will also be on the radar. Zoom is currently aiming to deliver annual revenue of $3.975 to $3.990 billion and adjusted EPS of $4.56 to $4.61. For perspective, Zoom reported $2.65 billion in revenue and EPS of $3.34 in the last financial year.

Investors will want to hear more about the recent acquisition of Kites to help boost its Machine Translation solutions and the $14.7 billion buy of Contact Centre as a Service firm Five9.

Where next for the Zoom share price?

The Zoom share price hit an all-time of $588 in October last year before starting its decent. The share price has been forming lower highs across the year. Since early June the Zoom share price has been trading within a descending channel, it trades below its 50 & 200 sma in a bearish chart. The RSI is supportive of further downside whilst it remains out of oversold territory. 

Immediate support can be seen at $328 the lower band of the channel, a break below this level could spark a deeper selloff to $317 the June low and on towards $274 the year to date low.  

Any recovery in the share price would need to retake the 200 sma at $364 and the 50 sma at $371 in order to attack the upper band of the descending channel. A move above the August high of $404 could see buyers gain traction. 

Market chart of Zoom.  Analysed on August 2021 by FOREX.com

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