The fastest-growing tech companies of 2020 look toward a post-Covid world

In a boom year for technology, a handful of U.S. software and digital commerce companies powered through the pandemic with such explosive growth that their business is now more than twice as big as it was before the world first knew about Covid-19.

The financial results are now mostly in for 2020, following earnings reports this week from video chat company Zoom and cloud database vendor Snowflake. They were two of the biggest winners last year, as the new world of remote work turned their already-popular products into essential services for an increasing number of large and small businesses.

Among publicly traded U.S. tech companies valued at $5 billion or more, seven recorded revenue growth of at least 100% last year. Some of the companies report on a normal calendar year, while others are on fiscal years, with the latest quarter ending in January.

This year is poised to look very different than 2020. Multiple vaccines are now available across the country, lifting optimism that the economy will reopen in coming months, allowing people to return to work and attend group gatherings. Investors are pondering what to expect from pandemic-fueled businesses as some sense of normalcy returns.

Here are the tech companies that grew the fastest last year and what they’re telling shareholders to expect in 2021.

• 2020 revenue (fiscal 2021): $2.65 billion, up 326%
• 2021 forecast (fiscal 2022): $3.76 billion – $3.78 billion, up 42% – 43%
• Stock price: Up 191% in the past 12 months

Zoom’s stock took off in early 2020 as companies started sending their employees home. Nobody knew then that a year later we’d still be working remotely.

After revenue more than doubled in the quarter that ended in April, growth only accelerated, with sales more than quadrupling in each of the next three periods compared with the year-earlier quarters. Zoom said in its latest earnings report this week that the number of customers with 10 employees or more jumped 470% in a year to 467,100.

More startling than revenue growth is Zoom’s profitability. Zoom reported net income for the full fiscal year of $671.5 million, up more than thirtyfold from the prior year.

Zoom’s market cap soared as high as $162 billion in October before a steep pullback in recent months to about $100 billion at Wednesday’s close.

It’s only natural that Zoom’s growth would moderate dramatically, but the company is still projecting expansion of over 40% in fiscal 2022, which ends in January.

“Although we remain optimistic on Zoom’s outlook, please note the impact and extent of the Covid-19 pandemic and people returning to in-person contact still remain largely unknown,” said Zoom CFO Kelly Steckelberg said on an earnings call. “Our outlook is based on our current assessment of the business environment.”

• 2020 revenue: $2.89 billion, up 226%
• 2021 forecast for gross order value: $30 billion – $33 billion, up 22% – 34%
• Stock price: Up 45% from IPO in December

DoorDash was struggling before the pandemic hit. The food delivery company recorded a 2019 operating loss of $616 million on $885 million in revenue, losing money on the average order.

But the sudden closure of restaurants for in-person dining forced millions of eateries to sign up with DoorDash to reach consumers, who were suddenly ordering much of their food by smartphone.

DoorDash’s growth was so dramatic that the company wound up going public in December with one of the largest tech IPOs in history, raising $3.4 billion. The business model also flipped, leading the company to a 24% contribution margin in the fourth quarter and a narrower net loss for the year.

The company faces multiple potential headwinds in 2021. The eventual reopening of restaurants could lead to a steep drop in deliveries, while a highly competitive market of technology providers to restaurants threatens to put pressure on pricing.

Still, DoorDash is forecasting order volume to increase by up to 34% for the full year. In its fourth-quarter earnings report, DoorDash said it’s not providing revenue guidance because, “we do not directly manage the business to this metric.”

• 2020 revenue: $2.95 billion, up 139%
• Forecast for next two quarters: $2.25 billion, up 99%
• Stock price: Up 305% past 12 months

The closure of gyms plus work-from-home requirements added up to a monster year for Peloton, which said last month that workouts in the December quarter quadrupled from a year earlier.

Peloton’s most rapid quarter for growth was from July to September (its fiscal first quarter), when revenue jumped 232% as fitness hounds dealt with lockdowns across much of the country. Sales more than doubled for three straight quarters, and Peloton isn’t projecting much of a slowdown over the next two periods.

The bigger challenge is producing exercise cycles fast enough to meet demand.

“With many of our markets reaching record level Covid-19 cases and implementing new stay-at-home orders, we continue to see robust demand for our products,” Peloton said in its fiscal second-quarter report in February. “As a consequence, we are carrying a substantial number of deliveries into Q3.”

Peloton said it’s investing over $100 million in air and ocean freight “to improve our order-to-delivery windows.”

• 2020 revenue (fiscal 2021): $592 million, up 124%
• 2021 forecast (fiscal 2022) for product revenue: $1 billion – $1.02 billion, up 81% – 84%
• Stock price: Up 106% since IPO in September.

Only two U.S. tech IPOs last year were bigger than DoorDash’s, and one was Snowflake. The company’s cloud database technology was taking off well before the calendar turned to 2020, but became even more critical during the pandemic for businesses that needed to track supply-chain disruptions, drug trials and health records.

In its fourth-quarter earnings statement on Tuesday, Snowflake reported 117% revenue growth after sales increased by 119% in the prior period. Its net loss more than doubled to $198.9 million.

Snowflake now counts 77 customers spending more than $1 million a year on product revenue, up from 41 in the same quarter a year earlier.

Snowflake is less likely than other companies on this list to face a dramatic post-Covid slowdown because ongoing demand for technology allows businesses to push data to the cloud and run critical analyses.

The company said product revenue, which accounts for 94% of total sales, will jump by 81% to 84% in fiscal 2022.

• 2020 revenue: $1.73 billion, up 111%
• Forecast for first quarter: $513 million – $536 million, up 125% – 135%
• Stock price: Up 258% in past 12 months

Masks, masks and more masks. That was the story for Etsy early in the pandemic, when there was a shortage of medical face masks. In the second quarter, the company sold $346 million worth of masks, accounting for 14% of marketplace revenue, after Etsy encouraged third-party sellers to try their hand and homemade masks.

Etsy took advantage of all that new traffic to its e-commerce app by surfacing items in the categories of homewares, crafts, apparel and beauty supplies. By the end of the year, only 4% of sales were coming from masks, but revenue still surged 129%.

Etsy said in its fourth-quarter report that 50% of the “mask-only” buyers in the third quarter came back the following period to buy something else. Finance chief Rachel Glaser called that “a great signal that we are retaining and converting buyers who are coming to Etsy for some of their essential purchases.”

Growth is projected to stick in the triple digits through the first quarter, as Etsy told investors to expect revenue expansion of 125% to 135%. However, the company said it isn’t providing a forecast further into the year “given the continued uncertainties facing Etsy, e-commerce at large and global macroeconomic conditions that impact consumer spending.”

• 2020 revenue: $257.9 million, up 104%
• Forecast for current quarter: $79.5 million to $81.5 million, up 102% – 107%
• Stock price: Up 1,453% in the past 12 months

Digital Turbine is an $8 billion company that entered 2020 worth about $600 million. The stock price jumped almost 700% last year and has rallied another 60% to start 2021, buoyed by better-than-expected results for the December quarter.

Founded in 1998 and based in Austin, Texas, Digital Turbine is a mobile software company, whose products are preloaded onto Android phones sold by carriers like Verizon and AT&T. The company makes money by selling ad space to game developers, digital music providers and e-retailers, which find the virtual real estate valuable because it puts their app right in front of consumers.

Digital Turbine more than doubled revenue in 2020 by partnering with large carriers outside the U.S. and through an expanded deal with Samsung that gets its technology into far more countries. As more people turn to their phones for entertainment, food delivery and shopping, Digital Turbine gets more opportunities to make money.

In its earnings report last month, Digital Turbine provided guidance only through the current period, which closes at the end of March. The company expects revenue to more than double for a third consecutive quarter.

Last week, Digital Turbine said it’s buying mobile game ad company AdColony for $400 million.

• 2020 revenue: $9.5 billion, up 101%
• 2020 bitcoin revenue: $4.57 billion, up 785%
• Stock price: Up 197% in past 12 months

Square’s 2020 was unlike any of its peers: Almost half its revenue came from bitcoin.

Bitcoin revenue at the company climbed to $4.75 billion last year from $516.5 million in 2019. Excluding bitcoin, Square’s revenue rose only 17%.

“Bitcoin revenue increased primarily due to an increase in the number of active bitcoin customers, as well as growth in customer demand and bitcoin prices,” Square said in its annual report. The company said that in January, more than 1 million customers bought bitcoin for the first time.

Trading goes through Square’s Cash App, which consumers use to send money digitally and to invest. Square, which got its start offering hardware and software to help small businesses accept credit and debit cards, has been heavily promoting the Cash App and has gained a ton of traction since enabling bitcoin purchases in 2018.

Square didn’t provide any forecasts for revenue or profit. The company said it plans to double its salesforce in 2021 and that costs for sales, marketing and administrative items will increase 41%.

While bitcoin trading has been a huge boon for Square’s top line, it’s a low-margin business because the company makes money only from what amounts to a transaction fee. Square said that for bitcoin revenue, its gross margin, or the money left after accounting for the costs of goods sold, was 3.5%. That dragged down Square’s overall gross margin for the year to 29% from 40% in 2019.

“In future quarters, we recognize that bitcoin revenue may fluctuate as a result of changes in customer demand or the market price of bitcoin,” Square said in its report.

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