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Why Zendesk, Inc. Stock Jumped Wednesday

By Daniel Sparks - May 2, 2018 at 4:16PM

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Zendesk's rapid growth persisted in Q1 as the customer-service platform company continued to attract more large organizations.

What happened

Shares of cloud-based customer service platform Zendesk (ZEN 27.99%) jumped as much as 9.6% on Wednesday. As of 4 p.m. EDT, shares are up 7.4%.

The stock's rise follows Zendesk's solid first-quarter results, including revenue and adjusted earnings per share that both came in higher than consensus analyst estimates for the two key metrics. Zendesk's outlook for its second quarter was also above the consensus analyst estimate for the period.

Zendesk support dashboard metrics

Image source: Zendesk.

So what

For its first quarter, Zendesk reported revenue of $129.8 million, up 38% year over year. On average, analysts were expecting revenue to rise 36% year over year to $126 million. Zendesk's adjusted earnings per share came in at $0.02 -- up from an adjusted loss per share of $0.03 per share in the year-ago quarter. This adjusted profit per share was well ahead of a consensus analyst estimate for a loss per share of $0.03.

Highlighting the company's staggering growth, Zendesk achieved an annual revenue run rate of $500 million during the quarter. Zendesk's revenue run rate has compounded 50% annually since it achieved a $100 million annual revenue run rate in May 2014.

Now what

With such a strong quarter behind it, Zendesk raised its guidance for its full-year revenue. When Zendesk reported its fourth-quarter results, the company said it expected 2018 revenue to be between $555 million and $565 million. Now management expects 2018 revenue to rise to between $565 million and $572 million.

Zendesk said it expects the growth it is seeing from both its small and midsized organizations and larger enterprise companies to remain catalysts. "We expect continued growth in both areas throughout the year thanks to our focus on accelerating our push upmarket and further maturing our omnichannel offering," said Zendesk management in the company's first-quarter shareholder letter.

But Zendesk's biggest opportunity is likely its ongoing penetration of larger organizations, as the company continually expands its portfolio of products designed for these enterprise customers.

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