Zoom’s Q1 earnings will revolve around pandemic, security issues

Video chat software giant Zoom (ZM) is scheduled to report its Q1 2021 earnings after the bell on Tuesday, giving investors and analysts their first look at how much growth the company has experienced as a result of the coronavirus pandemic and ensuing lockdowns.

Here’s what analysts are expecting from the company, as compiled by Bloomberg.

Zoom has been among the biggest beneficiaries, if you can call it that, of that pandemic. The lockdowns, which are now being eased in many countries, forced people to gather in front of their laptops, smartphones, and tablets to stay in contact with their friends and loved ones, work from home, and go to classes.

Zoom CEO Eric Yuan attends the opening bell at Nasdaq as his company holds its IPO in New York. (AP Photo/Mark Lennihan, File)

Thanks to its ease of use, and free 40-minute chat sessions, Zoom became the de facto chat platform for people around the world looking to connect. But as its popularity exploded at the beginning of the pandemic, cybersecurity experts began warning that the company’s lax approach to security and safety were a major issue.

A laundry lists of issues

Zoombombing, in which random users would crash Zoom chat sessions and show images of vile content or scream curses, became such a problem that the New York City Department of Education banned the use of the platform for distance learning.

The company also didn’t enable password protection or a virtual lobby by default for every chat, which allowed unwanted users to join, and was sharing data with Facebook. Video chats were also being routed through China, which raised the prospect that the Chinese government would be able to access recordings of users’ chats.

On top of it all, Zoom claimed to be using end-to-end encryption with its chats, when it actually wasn’t. End-to-end encryption encrypts a message’s data from the point it leaves your device and only decrypts it on the device of the user you’re talking to.

While Zoom was using secure encryption, it wasn’t end-to-end encryption, which is the gold standard for chat services.

It all resulted in high-profile users leaving the platform and calls for an FTC investigation into the firm.

In response to the criticism, Zoom embarked on a 90-day plan to revamp its platform security. It froze any plans to add new features, and focused on ensuring all chats were password protected and that they had a virtual lobby that users could use to screen chat participants before they could join. The company also purchased Keybase with the intention of using that company’s end-to-end encryption expertise to add the functionality to Zoom chats.

So far the move seems to be paying off, as clients such as the NYC Department of Education have started using the service again.

But Zoom has also been criticized for mischaracterizing its number of users. In April, the company claimed it had 300 million daily users, but The Verge recognized a change in the wording of Zoom’s statement announcing the milestone, which rephrased the number as “300 million daily meeting participants.”

The difference between a user and a participant is dramatic as a single user can participate in multiple meetings each day. In a statement at the time, Zoom said that the phrasing was a genuine oversight, but it added to the laundry list of issues the company was dealing with.

Despite all of that, the company appears to be in solid shape moving forward, and continues to be a leader in the video chat app space.

Got a tip? Email Daniel Howley at [email protected] over via encrypted mail at [email protected], and follow him on Twitter at @DanielHowley.

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