The spotlight in the investment world is currently on Anthropic, a rapidly advancing artificial intelligence (AI) laboratory revolutionizing software development with its no-code tools. This surge in Anthropic’s capabilities is influencing the market, leading to declines in share prices across many software stocks. With its valuation soaring into the hundreds of billions and revenue showing explosive growth, Anthropic is capturing the attention of investors everywhere.
However, individual investors face a hurdle; they cannot directly invest in Anthropic until it goes public, which is anticipated later this year. For those looking to gain exposure to Anthropic, Zoom Communications stands as a viable option. As the parent company of Zoom Video, Zoom made a significant investment in Anthropic several years ago, which has now transformed into a lucrative opportunity.
In 2023, Zoom allocated $51 million to Anthropic when it was still a nascent start-up. Now, analysts predict that this investment could balloon to between $2 billion and $4 billion in value. The exact valuation remains uncertain due to possible dilution from future funding rounds, complicating the picture of Zoom’s ownership stake in Anthropic.
The pathway to an IPO appears promising for Anthropic, which is expected to launch at a market cap surpassing its current valuation of $380 billion. Should its revenue trajectory continue at a projected 10x growth year-over-year through 2026, the company might soon report tens of billions in revenue, approaching $100 billion from its humble beginnings. Even when considering dilution, Zoom’s share in Anthropic could be valued at $5 billion or more upon the initial public offering.
As of February 24, Zoom’s market capitalization stands at about $26 billion. A $5 billion stake in Anthropic would represent nearly 20% of Zoom’s market cap at once, a figure that remains unaccounted for on its balance sheet. Coupled with $8 billion in cash reserves, Zoom’s effective enterprise value could fall to approximately $13 billion following Anthropic’s IPO.
Despite not being in a hypergrowth phase like during the pandemic, Zoom’s core business still posted a revenue increase of 4.4% year over year last quarter, along with notable margin expansion. With operating earnings of $1.1 billion in the past 12 months, Zoom appears to have a relatively low valuation of less than 12 times its estimated enterprise value leading up to its public offering.
For investors contemplating whether to buy Zoom shares based on its stake in Anthropic, the financial indicators suggest a potentially advantageous purchase if confidence in Zoom’s business stability and the value of its Anthropic investment holds strong. This scenario represents a unique opportunity for investors to benefit from a growing tech landscape while also maintaining a foothold in a solid company poised for future gains.