Zoom's Anthropic Windfall: When Venture Beats Video

Zoom heads into Q2 earnings season with something the market hasn't seen in years: a 15-quarter revenue streak and a $1.3 billion problem. Not the kind of problem that keeps CFOs awake at night. The kind that makes them wish their core business was as exciting as their venture portfolio.

The videoconferencing company's initial $51 million investment in Anthropic, made in May 2023, has multiplied 25 times over. Zoom's stake in the artificial intelligence startup is now worth just under $1.3 billion, according to regulatory filings released Friday, May 22. For context: that's more than 10 percent of Zoom's first-quarter revenue of $1.24 billion.

The numbers on the core business are respectable. Q1 revenue climbed 5.5 percent year-over-year. Adjusted earnings per share reached $1.55. Full-year guidance has been raised to $5.96 to $6.00 per share on revenue projections of $5.08 billion to $5.09 billion. Zoom authorized a $1 billion share buyback. By any measure that doesn't involve artificial intelligence, this is a company executing competently.

Yet analysts are doing something unusual. They're reaching for a different number. Wedbush, Baird, and Bank of America have all circled the Anthropic stake as the hidden value driver. Some project it could be worth $2 billion to $4 billion or more, depending on dilution from subsequent funding rounds. The phrase "hidden gem" appears in multiple equity research reports as though a $1.3 billion stake in a private company is something you stumble across in the back of a filing cabinet.

This tells you everything about where Zoom's narrative has shifted.

Anthropoic itself is generating the kind of growth rates that make traditional software look anaemic. CEO Dario Amodei disclosed this month that the company logged 80x growth in both usage and annualized revenue during the first quarter. The startup is raising up to $30 billion at a valuation of $900 billion, with Sequoia Capital, Dragoneer Investment Group, Altimeter Capital, and Greenoaks Capital Partners co-leading the round. Some analyst projections have valued Anthropic as high as $2 trillion at a future IPO.

Here's the uncomfortable part for Zoom shareholders: the market is pricing in the venture bet as the upside case, not the videoconferencing business. A higher Anthropic valuation would boost Zoom's reported assets and GAAP earnings. It would not, however, fix weak revenue growth or narrow guidance ranges. The core business is humming along. The core business is also generating low-single-digit growth in a market where the S&P 500 is expected to deliver mid-to-high single digits annually.

Zoom has built a fortress balance sheet. Its cash position is substantial. Its buyback authorization is real. But when analysts are excited about the equity stake in a private AI firm as the primary value driver, when the phrase "hidden gem" appears with more frequency than the actual earnings guidance, the story has already rotated. The videoconferencing streak continues. The market's attention has moved somewhere else entirely.

This is not a criticism of Zoom's capital allocation. It's an observation about what happens when your venture investment becomes the more interesting part of your earnings story than the business that actually generated the cash to make the investment in the first place.