Zoom shares opened dramatically higher on Friday, surging more than 9% to approximately $105.55, following the video conferencing giant’s impressive first-quarter performance and the disclosure of a remarkably profitable investment in artificial intelligence startup Anthropic.
The financial results exceeded expectations on multiple fronts. Revenue totaled $1.24 billion, marking a 5.5% increase compared to the same period last year and surpassing Zoom’s own forecast of $1.22 billion. Adjusted earnings per share reached $1.55, up from $1.43 in the prior-year quarter. The company generated $500.5 million in free cash flow, representing an 8% increase.
Enterprise segment revenue climbed 7.2% to $755.7 million, now representing 61% of Zoom’s total revenue. The number of customers with annual spending exceeding $100,000 expanded 8.2% to 4,534.
The net dollar expansion rate improved to 99% from 98%, indicating that current customers are gradually increasing their expenditures.
CEO Eric Yuan attributed the strong performance to artificial intelligence initiatives. Paid users of AI Companion experienced 184% year-over-year growth. The company’s newer AI-powered note-taking feature, My Notes, attracted 1.5 million licensed users in just four months following its debut.
“Customers are increasingly adopting Zoom as an AI-first system of action for modern work,” Yuan said.
The earnings narrative gained additional momentum on Friday when a regulatory disclosure unveiled the remarkable appreciation of Zoom’s Anthropic investment.
Zoom invested approximately $51 million in Anthropic during May 2023 via its Zoom Ventures investment arm. That position has appreciated to nearly $1.3 billion — representing a gain exceeding $1 billion. The initial investment was designed to facilitate integration of Anthropic’s Claude language models into Zoom’s artificial intelligence offerings.
Anthropically is reportedly nearing completion of a massive funding round potentially reaching $30 billion at a $900 billion valuation, with Sequoia Capital, Dragoneer, Altimeter, and Greenoaks each expected to invest $2 billion. Should that valuation materialize, Zoom’s stake could appreciate further.
Cantor Fitzgerald analysts observed that if the Anthropic position, estimated at $1.5 billion of Zoom’s aggregate $1.88 billion strategic investment portfolio, achieves the $900 billion valuation benchmark, Zoom’s share price could reach $116.
Management increased its full-year projections. Zoom now anticipates revenue between $5.08 and $5.09 billion, adjusted EPS ranging from $5.96 to $6.00, and free cash flow of $1.7 billion for fiscal 2027.
The company also approved a fresh $1 billion share repurchase authorization.
Wall Street analysts responded swiftly. Morgan Stanley increased its price target to $105 from $92. Rosenblatt elevated its target to $130 from $115. Benchmark raised its outlook to $125 from $121. Mizuho adjusted upward to $120, and Needham also increased to $130. Bank of America moved to $105 while maintaining a Neutral rating.
Cantor Fitzgerald, which kept its Neutral rating, raised its target to $104 from $87, pointing to growing adoption of Zoom’s CX, Phone, and AI products.
Zoom’s 52-week peak of $113.73 was achieved during Friday’s trading session.
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