- Zoom is focusing on maintaining the quality of video calls and keep them reliable amid the rapid growth in the number of new users.
On CNBC’s Squawk Box Tuesday, Zoom Chief Financial Officer Kelly Steckelberg said the company is seeing cost increases associated with its rapid growth in usage.
Zoom is having a moment, with teachers, yogis, religious leaders, acquaintances and, of course, corporate staff taking the app online to gather. “ZOOM Cloud Meetings” toped the free charts in U.S. mobile app stores in Apple and Google, ahead of giants like Facebook Messenger and Netflix, as well as the popular TikTok social app.
Steckelberg gave no new guidance and instead pointed to the March 4 earnings report for the company. Steckelberg then said that Zoom expects gross margins in the 2021 fiscal year to be at the lower end of its long-term target of 80 percent to 82 percent.
“We suggested then that we predicted a rise in our costs that would impact on our gross margins, and that’s consistent with what we’re still seeing,” said Steckelberg Tuesday.
Zoom has seen a spike in users since the COVID-19 pandemic has pushed several companies and schools to remote work and video calls. Zoom CEO Eric Yuan told CNBC earlier this month that 200 million people used the software per day in March after several stay-at-home mandates were implemented, from about 10 million in December.
The surge in users has also sparked criticism around Zoom’s privacy and security. The company announced it was will halt new features for the next 90 days while it works to improve the platform’s privacy.
“When we entered this pandemic and saw the rise in demand, we were very focused on ensuring that the platform was secure, efficient and sustainable,” said Steckelberg on Tuesday. “We’re very focused on ensuring that anyone who wants or uses Zoom can use it.”
Zoom’s engineering operations department employees have added servers and other hardware to each of the company’s 17 data center sites, said, Steckelberg. Two more are coming out this week or next week.
If one location gets swamped with networking traffic it may send the load to the other locations. “We architect our data centers in general and have designed them to operate at a peak capacity of 50 percent,” Steckelberg said.
Zoom has been built for companies, not everyday consumer use, so it’s unclear if the company will turn the free users to paying users.
