Spurred on by remote work, Zoom shares have nearly tripled in value since the beginning of the year.
On Tuesday, when the videoconferencing firm reports its earnings for the quarter ending April 30, investors will get a better sense of whether high expectations for Zoom (ZM) - Get Report match its reality.
Analysts polled by FactSet are expecting sales of $203.5 million for the fiscal first quarter, and earnings of 9 cents per share.
Here are the key themes to watch.
1. New Paid Accounts
Zoom was one of the first apps to report a huge spike in usage as stay-home orders took effect in March. Its CFO, Kelly Steckelberg, said on its last earnings call, in early March, that the large majority of the surge was on the free tier of the service, and that it was too soon to make projections on how many would convert to a paid tier. On Tuesday, investors will learn how much of the increased activity resulted in paid customers, and how Zoom plans to incentivize free users to start shelling out for its paid tiers, which offer longer meetings with more users and other perks.
2. Security Issues
Weeks ago, Zoom shares hit a rough patch as reports emerged of lax privacy and security standards in Zoom's software. The company says it has addressed many of those fixes, but this may well be an ongoing issue for Zoom. As remote work becomes the new normal in many professions, analysts expect enterprises to prioritize privacy and security in choosing remote work apps. Zoom is working on end-to-end encryption for paying customers and some other customers, such as schools. But those investments aren't cheap, and could weigh on Zoom's profit margins in subsequent quarters.
3. Full-Year Outlook
For its fiscal year, which ends in January 2021, Zoom guided for revenues of between $905 million and $915 million, and earnings of 42 to 45 cents per share. Wall Street's expectations are a bit higher, with a current consensus of $942 billion for the full year, and $224 million for the quarter ending in July. On Tuesday, investors will be watching to see if Zoom adjusts its revenue guidance upward based on new information, as well as the company's overall commentary on how it plans to leverage the current moment into lasting gains.