Zoom’s surging free user base dents margins as cloud costs rise

(Reuters) — Zoom warned on Monday that its gross margins would remain under pressure going into 2021 as the surging number of free users of its video conferencing service makes it hard to offset a spike in costs to maintain its growth.

Shares of the company, which have risen about sevenfold this year, fueled by the meteoric rise in demand for video conferencing for work, school, and socializing due to the COVID-19 pandemic, fell 5% after the bell, despite upbeat fourth-quarter forecasts.

Zoom operates some of its own datacenters, but it also relies on cloud computing services from outside vendors such as Amazon and Oracle, meaning it must bear costs for free users.

Those bills, driven in part by a jump in free users in the third quarter as millions of students and teachers started new school semesters, pushed Zoom’s gross profit margins down to 66.7%, below analysts’

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Intel’s margins tumble as customers shift to cheaper chips, shares slide 10%

By Stephen Nellis

(Reuters) – Intel Corp on Thursday reported that margins tumbled in the latest quarter as consumers bought cheaper laptops and pandemic-stricken businesses and governments clamped down on data center spending, news that sent its shares down 10%.

Intel, the dominant provider of processor chips for PCs and data centers, has struggled with manufacturing delays. In July, it said its next generation of chipmaking technology was six months behind schedule.

Chip sales are booming, but customers want lower-priced chips rather than Intel’s pricier high-performance offerings, dragging down overall gross margins.

The pandemic has given Intel a boost in the form or surging laptop sales as employees and students work and learn from home. Sales in its PC group were $9.8 billion, beating analyst estimates $9.09 billion, according to FactSet.

But Intel sold a higher volume of less-profitable chips in its PC business, driving operating margins down to 36%

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Align Technology (ALGN) Beats on Q3 Earnings, Margins Up

Align Technology, Inc.’s ALGN third-quarter 2020 earnings per share (EPS) was $2.25, up from the year-ago EPS of $1.48, reflecting an improvement of 52%. The quarter’s EPS surpassed the Zacks Consensus Estimate by a stupendous 281.4%. Significantly better-than-expected revenues of Invisalign Clear Aligners and iTero scanners during the third quarter despite the COVID-19 pandemic resulted in the bottom-line beat.

GAAP EPS for the quarter was $1.76, up from the year-ago EPS of $1.28, reflecting an uptick of 37.5%.

Revenues surged 20.9% year over year to $734.1 million in the quarter, beating the Zacks Consensus Estimate by 38%.

Segments in Detail

In the second quarter, revenues at the Clear Aligner segment rose 20.2% year over year to $620.8 million due to volume increase across geographies. Within the segment, Invisalign case shipments amounted to 496.1 thousand, up 28.7% year over year.

During the quarter, Invisalign volumes were up 24.9% and 33.6%

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