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What you see, and what you don’t

3 June 2020 By Robert Cyran

Zoom Video Communications is benefiting massively from coronavirus lockdowns – and from Amazon.com delivery. The $60 billion videoconferencing service had an astonishing first fiscal quarter as revenue surged 169% and profit rocketed. Zoom’s ability to rent thousands more servers daily from Jeff Bezos’ company is one reason that was possible.

It can be hard to grasp how fast usage of Zoom has grown thanks to social distancing and remote working, but perhaps the best indicator is that at the end of January, the company was on pace for 100 billion minutes of meetings in a year. It now says it’s on track for over 2 trillion. It couldn’t handle this sort of growth on its own. Chief Executive Eric Yuan thanked Amazon Web Services on a call with analysts, noting that for sometimes Zoom added thousands of servers a day for several days in a row.

This flexibility is relatively costly. That’s why the company says it will build its own data centers in the next several quarters to raise its gross margins. And how long its good fortune will last is uncertain – economies worldwide are opening up, which could mean slower growth, or perhaps even shrinkage in the future as in-the-flesh meetings resume.

With the company valued at over 30 times its own estimated revenue for the year ending next January and its stock up more than 200% so far this year, investors are counting on Zoom to keep the customers it has and keep adding more at pace. That’s a tough proposition as competition from Microsoft, Slack Technologies and others ramps up. But Zoom wouldn’t be in pole position at all without Amazon’s timely delivery of backend computing power. It’s another lockdown win for Bezos, as well.

 

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