“Zoom is now integrated into all aspects of our lives,” says Zoom CFO Kelly Steckelberg. “We look forward to the day that the pandemic is over and we can resume more normal activities and yet I don’t think that in itself is a threat to Zoom. People have grown accustomed to it. Working from home is not a fad. We are all really adjusting to this new way of life and are integrating Zoom into all aspects.”
Working From Home Is Not A Fad
We indicated coming into the quarter that we really expected strong growth in Q2. We saw that across all geographies and all industries. International grew over 600 percent year over year. We saw strong performance in industries like education and nonprofits. We also had our largest Zoom Phone deal to-date signed in Q2. There was really strong performance across all aspects of our business.
What we saw from the retention perspective is that working from home is not a fad. People are really adjusting to this new way of life. They’re integrating Zoom into all aspects. We saw strong retention not only in our enterprise but in customers with fewer than ten employees as well. As we’ve continued to focus on leveraging both the public cloud as well as our own co-located data centers that’s why we saw improvement in the gross margins. We are going to continue to optimize across all of those metrics as we focus on the rest of the year.
Hired Over 500 Employees In Q2
We have worked very tirelessly. Our entire Zoom team is doing everything we can to continue to support not only our existing customers but to ensure that every customer who has a need for Zoom has access to it. We have focused quickly on scaling up our employee base. We have hired over 500 employees in Q2. That’s the largest growth we’ve had to date. We are also working from home like many of our customers are and really supporting our employees to ensure that we can meet the needs of the customer. We are leveraging great partners like AWS and Oracle as we need to in order to ensure that we have the capacity to continue to support our customers along the way.
We continue to look for opportunities to invest to grow the top-line (while free cash flow rose by 2,000 percent year over year). We had record operating margins in the quarter at 41.7 percent. We expect those to come down for the rest of the year as we are focusing on investing in more salespeople to meet the demand and more engineers to continue to innovate and build our platform. Of course, we are always looking for opportunities with M&A, technology, or teams that can really augment our platform or our team to continue to drive that top-line growth.
Video Is The Future Of Communications
We really believe that video is the future of communications. With that, we want our Zoom customers to be able to use the Zoom platform with other best of breed products in platforms that they choose. We have integrations with many products out there and that’s great. We want our customers to be able to use the products that they know and love and have them work together seamlessly.
What we’ve heard from our customers is that while everyone is really longing for the day that we get to go back to a more normal life before COVID that in many ways they are loving the flexibility that this has brought to them. They get to wake up with their children, have a full day of work and then have dinner with their family at the end of the day.
End Of Pandemic Is Not A Threat To Zoom
I really believe that Zoom is now integrated into all aspects of our lives. We look forward to the day that the pandemic is over and we can resume more normal activities and yet I don’t think that in itself is a threat to Zoom. We have grown accustomed to it. We have seen so many additional use cases. If you think about Formula One having these great premium experiences leveraging Zoom now in bringing clients into the paddock.
There is a company in Singapore using it to do virtual tours. They did half of their new properties that came to sale in Q2 they showed them virtually and sold them this way. We are starting to see more and more ways that people are making more efficient and more effective. This way of communicating and working is here to stay.