Zoom Video Communications Inc. reported over $1 billion in revenue for the quarter ended in July, fueled by strong demand for its videoconferencing services that became ubiquitous during the pandemic for holding office meetings, school classes and all sorts of virtual gatherings.

The roughly 54% revenue increase, while slightly better than Wall Street expected, couldn’t match the massive growth Zoom saw in the prior-year period, when revenue surged more than fourfold as companies leaned more heavily into remote working.

Ticker Security Last Change Change % ZM ZOOM VIDEO COMMUNICATIONS, INC. 347.50 +6.69 +1.96%

Zoom shares fell more than 10% in after-hours trading, after closing up 2% on Monday.

But the growth—and Zoom’s expectation of more than $1 billion in revenue for the current quarter—underscores demand for office collaboration tools.

S&P 500, NASDAQ HIT RECORD HIGHS

Research firm International Data Corp. projects collaboration applications to become a roughly $51 billion market by 2025, nearly double 2020 levels.

Microsoft Corp. MSFT 1.29% in its most recent earnings report said that use of Teams, its group conferencing and collaboration software, had reached record levels with nearly 250 million monthly active users and nearly 80 million monthly active Teams Phones users with total calls surpassing one billion in one month.

As offices start to reopen, analysts are raising questions about Zoom’s ability to retain paying customers and sustain the kind of growth rate it has enjoyed during the pandemic.

Zoom Video Communications Inc. reported over $1 billion in revenue for the quarter ended in July, fueled by strong demand for its videoconferencing services that became ubiquitous during the pandemic for holding office meetings, school classes and al (Jakub Porzycki/NurPhoto via Getty Images / Getty Images)

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On Monday, Zoom said it now had about 504,900 customers with more than 10 employees, up from about 497,000 in the April quarter, and said about 2,278 customers generated more than $100,000 in revenue over the past 12 months, up from about 1,999 in the previous quarter.

Zoom has been adding features and services and in July agreed to buy cloud-based customer-service software provider Five9 Inc., a deal that Zoom said would allow it to tap into a $24 billion contact-center market.

"We achieved our first billion dollar revenue quarter while delivering strong profitability and cash flow," said Zoom founder and Chief Executive Eric S. Yuan, adding that the quarter also marked several milestones in Zoom’s expansion. "Today we are a global brand counting over half a million customers with more than 10 employees, which we believe positions us extremely well to support organizations and individuals as they look to reimagine work, communications and collaboration."

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Zoom’s second-quarter profit rose to about $317 million from about $186 million a year earlier, while revenue reached $1.02 billion, up from $663.5 million a year ago.

The results beat Zoom’s and Wall Street projections, according to FactSet.

The California-based company said it now expects annual revenue to reach $4.01 billion to $4.02 billion, compared with its earlier view of $3.98 billion to $3.99 billion, and $4.75 to $4.79 a share in adjusted profit, compared with its previous range of $4.56 to $4.61 a share.

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