Zoom's end-to-end call encryption service is only for paid users

Thursday, 04 Jun, 2020

As a result the company has poured resources into privacy and security.

The company also said the rapid growth seen in the April quarter might slow down as people return to work and demand from individual users dwindles. Revenue in the third and fourth fiscal quarters should be consistent with that performance, Chief Financial Officer Kelly Steckelberg said during a conference call. Zoom also upgraded its full-year guidance for revenue by nearly 100%. The software maker allows gatherings of as long as 40 minutes for no charge. It competes against tech giants like Cisco Systems Inc's Webex, Microsoft Corp Teams, and Google's Meet platform, which both offer services for paying clients and businesses while providing free access to customers. This is mainly because Zoom claims that providing end-to-end encryption to all users will lead to misuse of the platform.

The company said its gross margin narrowed during the quarter as it relied more on third-party cloud providers such as Amazon Web Services to accommodate the growing number of customers.

On Tuesday, Yuan made it clear that the reasoning for not offering it to free users: they wanted to work with the Federal Bureau of Investigation and law enforcement. The company also reported $0.20 per-share in adjusted profit during the three-month period.

Zoom's shares rose 0.9% to US$210 in pre-market trading in NY on Wednesday.

The numbers exceeded analysts' already heightened expectations, providing another lift to a rocketing stock that has more than tripled in price so far this year while the benchmark Standard & Poor's 500 index has fallen 5 per cent.

The company expects it to rise eventually above 300 million again.

Steckelberg told analysts Zoom is planning to add more capacity to its data centers. Zoom was also confronted with accusations of privacy violations in Q1.

According to Zoom, the company made a profit of $27 million on revenue that leapt 169% to slightly more than $328 million in the fiscal quarter that ended April 30.

Yuan said the company ended the quarter with 265,400 paying customers that have more than 10 employees. But videoconferencing company Zoom is doing great.

Analysts say they expect Zoom to maintain its focus on business customers, since that's how it makes money. Trolls have invaded myriad meetings, religious gatherings and other events, to share pornography and shout profanity or racial epithets, in a phenomenon known as "Zoombombing".

"Zoom's end-to-end encryption plan balances the privacy of its users with the safety of vulnerable groups, including children and potential victims of hate crimes", the company added.

While Zoom's revenue increased sharply, its costs rose even more steeply. This statement may be a concern for free users as without end-to-end encryption, the security features of the Zoom app are similar to using any website over HTTPS.