Blogs -Tech Growth Earnings Review for Q3 2020 - Part 3

Tech Growth Earnings Review for Q3 2020 - Part 3


December 14, 2020

author

Beth Kindig

Lead Tech Analyst

In the 3rd part of my Q3 earnings analysis, I review reports from Zoom Video, Okta, Snowflake, Crowdstrike, ZScaler and Elastic.

Zoom Video

Zoom Video provided a nearly flawless earnings report for the first full quarter that followed initial work-from-home orders. The blend of Zoom Video having virality across consumers from its freemium model combined with enterprise is the company’s strength strategically as the competitors do not have the virality component. In Q3, customers with more than 10 employees represented 62% of revenue with net dollar expansion rate of 130%. Globally, Zoom exhibits strong growth, as well, with revenue from APAC and EMEA growing 629% year-over-year.

However, gross margins were a weakness in the report at 68.2% compared to 82.9% last year and 72.3% last quarter. The company is providing the service for free to many users including K-12 schools during the pandemic. From my perspective, the temporary margin hit in exchange for virality and establishing consumer behavior is a good trade-off.

Okta

According to most standards, Okta’s earnings report was solid and resulted in an uptick in the stock price. However, the growth has been flat for most of this year.

Revenue rose 42% to $217.4 million ahead of estimates for $202.7 million. Bookings (remaining performance obligations) are growing faster than revenue at 53% to $1.58 billion. Calculated billings were up 44% year-over-year. This was a re-acceleration of calculated billings from the previous quarters in FY2021 where the pandemic weighed on budgets.

The company is profitable on an adjusted basis with EPS of $0.04 and free cash flow of $41.6 million, up from $9 million a year ago. Highlights include a growing number of customers in the financial services sector and government.

Snowflake

Snowflake grew 119% year-over-year to $159.6 million with remaining performance obligations of $927.9 million, or 240% year-over-year growth. Product revenue grew 115% year-over-year. The net revenue retention rate of 162% is impressive although other companies have exceeded this in their 6th year (Snowflake was founded in 2012 but was in stealth mode until 2014 when it began to work with customers).

Gross margins are between 58% to 63%, which it’s normal for a cloud company to be lower than a SaaS company on margins. However, operating margins were negative (30%) with FCF margins of negative (23%). Probably the biggest issue that Snowflake faces are the sales and marketing costs. In the previous two quarters, they were near or exceeded total revenue and in this quarter they were about 90% of revenue at $134 million compared to the $159 million in revenue.

CrowdStrike

CrowdStrike beat consensus estimates on both the top and bottom lines and raised Q4 guidance. Revenue grew 86% YoY, representing an 8% beat above Wall Street estimates. Subscription revenue increased 87% YoY while annual recurring revenue advanced 81% compared to a year ago. The company also achieved its most impressive quarter ever in terms of profitability, earning $0.08 per share on the bottom line. This was CrowdStrike’s third consecutive quarter of positive EPS and its highest total yet. Free-cash-flow margin increased to 33% and gross margin improved to 76%.

In the quarter, CrowdStrike added 1,186 net new subscription customers, representing growth of 85% YoY. CrowdStrike also continues to drive new module adoption in existing customers, as 44% of the company’s subscription customers have adopted five or more modules versus 39% in the previous quarter.

Zscaler

ZScaler announced Fiscal Q1 2021 results that easily cleared analysts’ expectations. Revenue growth accelerated to 52% YoY, which represents the company’s third consecutive quarter of growth acceleration.

Adjusted billings growth increased 64% YoY, far surpassing the consensus expectation calling for 39% growth. This beat was driven in part by a record quarter of seven-figure deals. The company’s net retention rate of 122% advanced from 120% last quarter and 119% the quarter before. Non-GAAP EPS of $0.14 was 8 cents better than expectations while the company also announced an impressive 30% FCF margin. Non-GAAP operating margin of 14% far exceeds the consensus of 2.9%.

Elastic

Elastic announced strong FQ2 earnings on 12/2. Total revenue increased 43% YoY, representing an 11% beat above consensus. Total billings grew 42% YoY while SaaS revenue increased 81% versus the same period a year ago. The company’s losses also improved significantly, with non-GAAP EPS of -$0.03 coming in 17 cents better than expected. Non-GAAP operating loss improved to -$1.9 million, representing a -1% operating margin versus -10% projected. Gross margins also came in better than expected with 77% versus a consensus of 75%. FCF margin was -13% for the quarter.

Subscription revenue totaled 93% of Elastic’s total revenue in the quarter, with 45% of total revenue coming from outside the US. Management views this geographical distribution as a strength in the company’s business model. Elastic’s net retention rate ticked down several points from last quarter but still remained modestly above 130%. Elastic now has a total of 12,900 subscription customers with 650 of those (5%) having annual contract values exceeding $100K.

Read the Full Article at Forbes

head bg

Get a bonus for subscription!

Subscribe to our free weekly stock
analysis and receive the "AI Stock: 5
Things Nobody is Telling you" brochure
for free.

More To Explore

Newsletter

Nvidia vs. AMD CEOs in AI GPU race, spotlighting AI inference competition.

AMD vs Nvidia: The AI Stock That Could Win by 2028

Last week, AMD offered more details on the release of their groundbreaking GPUs with little fanfare in the markets – which is par for the course as AMD has a history of being forgotten about until the

June 20, 2025
AI chip powering data growth with green upward graph, symbolizing semiconductor and AI market expansion

This AI Stock is Set to Surge from Inference Demand

Up until now, the AI conversation has been dominated by training and compute, yet inference is showing signs of exploding growth. Microsoft and Google recently highlighted 5x to 9x YoY growth in AI to

June 13, 2025
Taiwan Semiconductor drives AI growth amid geopolitical risk

Taiwan Semiconductor Stock: AI Growth Amid Geopolitical Risk 

Despite their leadership, AI stocks like Taiwan Semiconductor and Nvidia are flat year-to-date and trading at similar levels as June 2024. Clearly, the AI trade is not as straightforward as it might s

June 06, 2025
Man walks on a broken bridge with a stock chart overlay, symbolizing market challenges

Historic Market Uncertainty Meets $7 Trillion Debt Wall: What Comes Next for the S&P 500

We are seeing mounting evidence that this bounce may be the start of a new push to all-time highs, such as improved breadth, better than expected earnings plus the size of this bounce. However, one ca

May 27, 2025
a baseball stadium with Nvidia billboard

Nvidia Stock Faces a Choppy Q2, But Tailwinds Build for H2 Acceleration

Nvidia’s streak of blockbuster earnings has turned investor expectations into a high-stakes game— anything short of perfection risks disappointment. As the company gears up to report fiscal Q1 results

May 23, 2025
Microsoft stock up as Azure tops AWS, Google Cloud in Q3 2025

Microsoft Stock Surges After Q3 2025 Earnings: What Separates Azure from AWS, Google Cloud

Microsoft stock jumped after Q3 2025 earnings as Azure emerged as the only major cloud platform to accelerate growth this quarter — a rare feat amid macro pressures. Azure’s 35% constant currency grow

May 16, 2025
Bitcoin price chart signaling potential top despite favorable crypto news

Why Bitcoin’s Bull Run May Be Nearing a Top Despite Pro-Crypto Tailwinds

Since calling the Bitcoin bottom near $16,000 in late 2022, the I/O Fund has maintained a disciplined, contrarian approach — issuing 13 buy alerts before Bitcoin surged above $100,000. Now, signs sugg

May 09, 2025
S&P 500 hits key 2025 target as bond market and consumer trends signal rising volatility and shifting stock-bond correlation.

2025 Market Outlook: Why Stocks and Bonds Are Signaling More Volatility

As the S&P 500 reaches a key bounce target, troubling signs in bonds and consumer behavior suggest this market rally may be on thin ice. I/O Fund’s Knox Ridley explains why volatility may intensify an

May 02, 2025
Illustration of an investor holding an umbrella, shielding from stock market volatility.

The Impact of Tariffs on the Stock Market: Q1 Preview

Rising tariffs are injecting significant uncertainty into the stock market, triggering daily volatility and forcing analysts to revise earnings estimates. Our Q1 preview dives into the potential impac

April 25, 2025
Aerial view of Tesla's new Model Y Juniper parked in lines. Courtesy of Tesla, Inc.

Tesla Stock Faces Recalibration of Growth Expectations

Tesla’s stock is now facing a recalibration of expectations after Q1’s delivery report missed by a wide margin. Q1’s analyst consensus has gone from $25.98B at the start of the year to $23.97B in earl

April 17, 2025
newsletter

Sign up for Analysis on
the Best Tech Stocks

https://bethtechnology.cdn.prismic.io/bethtechnology/e0a8f1ff-95b9-432c-a819-369b491ce051_Logo_Final_Transparent_IOFUND.svg
The I/O Fund specializes in tech growth stocks and offers in-depth research for Premium Members. Investors get access to a transparent portfolio, a forum, webinars, and real-time trade notifications. Sign up for Premium.

We are on social networks


Copyright © 2010 - 2025