Sean D. Emory
Founding Partner & CIO of Avory & Co., Avory Foundational ETF (AVRY)
Zoom's AI capabilities are very underappreciated: its wealth of enterprise context can support continued growth as AI enters meetings, workflows and customer interactions. Its AI talent is underappreciated too. Zoom shows its Decision API ahead of Microsoft and OpenAI offerings on average across five text decision benchmarks. Oppenheimer upgraded Zoom, citing strong AI-platform uptake, growing ARPU and retention. x.com x.comÂ
Zoom's reacceleration thesis is intact because contracted backlog is growing faster than revenue, a sign of larger, longer, multi-product enterprise deals. Total RPO rose 14%, its fastest in a long time, with unbilled RPO up 19% and non-current RPO up 25%, while enterprise revenue grew 7.8%, its best in three years. AI drives demand: Virtual Agent customers rose 256% and 9 of 10 top contact-center deals included paid AI. It has 25% GAAP operating margins, $7.2B of cash and no debt. x.com x.comÂ
Microsoft's AI ROI is massive because it expects to sustain its current 18% year-over-year growth with 27% fewer employees. It is cutting its workforce by 27%, undercutting claims that AI has no ROI. x.comÂ
Microsoft is a dominant compounder at a highly compelling valuation because investors underestimate M365's resilience and Azure's growth. At 21x forward earnings, roughly the market multiple, the price ignores its ~27% OpenAI stake worth about $200B. M365 is embedded in nearly every large enterprise, backed by hard-to-replicate security and identity infrastructure, costs about $20 a user versus over twice that for separate apps, and grew 15%. Azure grew 39%, with modest acceleration guided. … Show more
Long Microsoft and short Zoom is the most straightforward alpha trade around. The long leg gives exposure to Microsoft and OpenAI, called good companies, while the short leg is Zoom and Anthropic, dismissed as bad ones. x.comÂ
Microsoft has been here before: a year or two behind, but with crushing distribution to almost every white-collar worker that has smothered rivals from Netscape to Slack and Zoom. AI expands software's value, Office ARPU could double or more within five years, and enterprises say they want to buy AI from Microsoft. AI revenue reached $37B in Q1 CY26, up 123%. The risk is real: Anthropic has leapfrogged OpenAI and is beating Microsoft in code and productivity. Shares sit 19% below their peak. … Show more
Zoom is a way to own Anthropic equity, and a purer play than Google because its Anthropic stake is larger relative to its market cap. Anthropic's revenue run rate reportedly rose to $44 billion from $30 billion a month earlier, and its next funding round should value it at $900 billion or more. x.com x.comÂ
Seat-based software is highly vulnerable in the AI era, while usage-based software with strong moats is the winning formula. AI agents can do many human tasks, shrinking seats and revenue at Salesforce, ServiceNow, Workday, Atlassian, HubSpot, Zoom, DocuSign, Asana, monday.com, UiPath and Adobe. Usage-based models that charge for compute, data or outcomes, such as Snowflake, Datadog, Cloudflare, Palantir and CrowdStrike, tend to grow with AI activity. Switching models is slow and may fail. x.comÂ
Zoom, Salesforce and SK Telecom offer double upside as proxies for Anthropic, which has filed an S-1 for a $1T+ IPO. Each holds billions of dollars of Anthropic exposure, plus vendor status and unique collaborations beyond a simple equity stake, yet the market prices none of them as AI beneficiaries. They are contrarian bets: Zoom's product has been relegated to a feature, Salesforce is the SaaSpocalypse poster boy, and SK Telecom is a telco just hit by a damning cyber attack. x.com x.comÂ
Zoom's stake in Anthropic and others, now valued at $3.7B, would have to be marked up to over $6B if Anthropic goes public at about $2T. Zoom beat on revenue, billings and EPS, though operating margin was slightly light and guidance was in line. It holds $7.2B of cash, generates $1.8B of free cash flow for about a 10% FCF yield on EV, and bought back $360M of stock. It is no longer an online churn story but an enterprise revenue story. x.comÂ
Software companies face a multi-year repricing because AI has removed the scarcity that made software valuable. For 20 years building software required engineers, letting SaaS firms charge monthly fees forever; when anyone can build a working product in a weekend with Claude, software stops being the moat. Atlassian is down 75%, HubSpot 69% and Figma 86%, and layoffs show headcount no longer scales with output. Survivors will be those with distribution, data and trust underneath. x.comÂ
Microsoft's latest earnings showed accelerating Azure growth with broad demand beyond frontier AI labs, capex discipline and Copilot turning the corner. Azure grew 43%, guided to 45%, with nearly 90% of $214 billion cloud revenue from customers outside frontier labs and RPO up 84% to $678 billion. It held capex while squeezing more from existing infrastructure, and can slow chip purchases if demand cools. Copilot passed 30 million paid seats, with revenue up over 60% quarter over quarter. x.comÂ
