Why is Spruce Point bullish on Zoom (ZM) when it's known for short selling?

Spruce Point Capital Management describes itself as a firm whose work typically produces strong sell opinions, citing a structural Wall Street bias toward optimism that it aims to counteract. This report is framed as a rare exception — a case where the firm believes the market has overcorrected in the bearish direction. Spruce Point argues the prevailing negative narrative on Zoom is unsupported by evidence and has created a material buying opportunity.

Has Zoom's revenue actually been declining?

No. Despite the dramatic slowdown after the COVID-era boom, Zoom has never reported a year-over-year decline in quarterly revenue. The company went from $330 million in last-twelve-month revenue at its April 2019 IPO to adding $3.5 billion in revenue over two pandemic years, and has retained that scale since.

What does Spruce Point think Zoom's revenue growth will look like?

Wall Street consensus expects 4% year-over-year revenue growth in each of the next two fiscal years. Spruce Point argues that is too conservative, pointing to 9% growth in enterprise customers above $100K, 7% enterprise segment revenue growth, double-digit growth in newer products, stabilization of the Online segment, and potential upside from an international business restructuring. The firm believes mid-to-high single-digit growth is achievable.

What is Workvivo and why is it mentioned in the report?

Workvivo is an employee communications and engagement platform within Zoom's product portfolio. The report describes it as experiencing explosive customer and ARR growth, with expansion into HR-related use cases. It is presented as further evidence that Zoom's transformation beyond video conferencing is producing real commercial traction across multiple product lines.

What does Spruce Point say about Zoom's international business?

The report acknowledges that Zoom's international operations have long underperformed. Spruce Point argues that a restructuring, sales capability upgrade, and improved go-to-market strategy could turn the international segment into a growth driver. That potential improvement is cited as one of the catalysts that could push revenue growth above current Street expectations.

Does Spruce Point own Zoom stock?

Yes. The firm discloses that it and/or its affiliates, subscribers, and clients may hold long positions and options in Zoom Communications, Inc. and may trade in and out of those positions without notice. Readers should factor that financial interest into how they weigh the report's conclusions.

Spruce Point, Known for Short Selling, Issues a Rare Strong Buy on Zoom: 40% to 100%+ Upside, $1.2B Hidden Anthropic Stake, and a Bear Thesis It Says Has No Evidence

The bear thesis rests on two pillars — AI will displace SaaS, and Microsoft Teams has made Zoom redundant — and Spruce Point says it found no credible evidence for either. Software engineers consulted for the report said AI alternatives cannot meet enterprise standards for reliability and legal compliance, and enterprises are not abandoning existing products. Zoom has never reported a year-over-year quarterly revenue decline despite normalizing from a $3.5 billion COVID-era surge, and newer segments are growing well above the 4% consensus forecast: enterprise customers above $100K grew 9%, Contact Center customers with more than $100K in ARR grew approximately 100%, and Zoom Phone crossed 10 million seats and likely $1 billion in ARR as the top UCaaS share gainer. The $1.2 billion Anthropic stake is not reflected in current valuation. Spruce Point says it has already shared its recommendations with Zoom's Board and believes management is open to considering them.

Ticker: ZM (Zoom Communications, Inc.)
Research Firm: Spruce Point Capital Management
Report URL: https://www.sprucepointcap.com/research/zoom-communications-inc?ref=shortreport.fyi
Position Disclosure: Spruce Point states that it and/or its affiliates, subscribers, and clients may hold long positions and options in Zoom Communications, Inc. and may trade in and out of these positions without notice.

Thesis

Spruce Point argues Zoom is materially undervalued — the bear thesis on competition, AI disruption, and weak growth is not credible, and operational improvement plus hidden asset recognition could drive 40% to well over 100% upside.

Bearish Thesis Unsupported: Spruce Point says it "failed to find credible evidence to support the bear thesis," citing conversations with highly experienced software engineers who said AI-built alternatives cannot meet enterprise requirements for rigor, reliability, and legal compliance, and that there is "little evidence that enterprises are abandoning existing products." (Circumstantial — based on expert interviews, not disclosed data.)
Never Declined: Despite adding $3.5 billion in revenue during COVID and subsequently normalizing, Zoom has never reported a year-over-year decline in quarterly revenue. The company generated over $9.4 billion in cumulative free cash flow through that cycle.
Platform Transformation: Zoom evolved from a video tool into a broader AI-first enterprise platform. AI Companion monthly active users grew 3–4x year over year; Zoom Phone surpassed 10 million seats in FQ3 2026 and likely reached $1 billion in ARR; Contact Center customers with more than $100K in ARR grew approximately 100% year over year; Workvivo is seeing explosive growth.
Teams Competition Overstated: Zoom's superior performance, reliability, and total cost of ownership have led the vast majority of enterprises to retain Zoom even when they already subscribe to Microsoft 365, the report alleges.
Online Segment Stabilized: The Online segment has stabilized and returned to growth after completing its post-COVID normalization, the report alleges — removing what had been a persistent drag on reported revenue trends.
Growth Set to Inflect: Street consensus expects only 4% revenue growth in each of the next two years, but enterprise customers above $100K grew 9% in FQ4, enterprise segment revenue grew 7%, and newer products are growing at double-digit rates. The report argues a mid-to-high single-digit growth rate is achievable — well above current consensus.
Depressed Valuation vs. Premium Margins: At FY2027 consensus, Zoom trades at 4.1x revenue, 9.5x EBITDA, and 16.1x free cash flow — a 13–31% discount to peers — despite 77% GAAP gross margins, 39% GAAP net profitability, and 40% free cash flow margins.
Unrecognized Anthropic Stake: Zoom holds an estimated $1.2 billion stake in Anthropic that the report says is not properly reflected in the stock's current valuation.
AI as Complement, Not Threat: Foundation model companies like Anthropic are, consistent with Zoom's federated AI strategy, positioned to complement incumbent SaaS platforms rather than displace them, the report argues. Enterprises may use AI productivity tools sold by Zoom to augment remaining employees. (Circumstantial — based on strategic framing, not disclosed commercial agreements.)

Notable Details

Spruce Point — which says its research "often" results in "high conviction strong sell opinions" — calls Zoom a Strong Buy. The firm framing itself as a forensic short-seller operation makes the directional reversal notable on its face.
Zoom's name became a verb during the pandemic as revenue grew by $3.5 billion in two years. The report uses that cultural ubiquity to argue Zoom became a durable household brand, not just a temporary beneficiary.
In Contact Center, deal size records are reportedly being broken, ARR growth is in the high double-digits, and customers with more than $100K in ARR are growing approximately 100% year over year — a category bears tend not to associate with Zoom.
Zoom Phone, now at 10 million seats and approximately $1 billion in ARR, was the top share gainer in the UCaaS market. It is still growing at mid-teens rates, representing a second revenue engine beyond video.
Spruce Point says it shared its recommendations directly with Zoom's Board and believes management is open to considering them — an unusual degree of disclosed engagement for a public research report.

"To be honest, we don't see an end to human involvement in business any time soon, and for those who do, there are other areas of the economy that will suffer much worse and long before the SaaS sector."

— Spruce Point Capital Management, pushing back on the "SaaS-pocalypse" bear case for Zoom

FAQs

What is the bear case on Zoom that Spruce Point is arguing against?

The two dominant bearish arguments are that AI will broadly displace SaaS software ("SaaS-pocalypse") and that Microsoft Teams has made Zoom's core video product redundant. Spruce Point says it found no credible evidence for either claim. Conversations with experienced software engineers indicated that AI-built alternatives cannot easily meet enterprise standards for reliability, security, and legal compliance, and that enterprises are not abandoning existing products.

What is Zoom's stake in Anthropic and why does it matter for ZM stock?

Zoom holds an estimated $1.2 billion stake in Anthropic, the AI company behind the Claude model. Spruce Point argues this stake is not properly reflected in Zoom's current market valuation, making it a hidden asset. The report also uses Anthropic as an example of a foundation model company that is more likely to complement Zoom's platform than compete with it.

What is Zoom Phone and how big has it gotten?

Zoom Phone is Zoom's cloud telephony product competing in the Unified Communications as a Service (UCaaS) market. It surpassed 10 million seats in FQ3 2026, has likely reached $1 billion in annual recurring revenue, and is still growing at mid-teens rates year over year. Spruce Point identifies it as the top share gainer in the UCaaS market and a meaningful second revenue engine beyond video conferencing.

What is happening with Zoom Contact Center?

Zoom Contact Center is the company's entry into the Contact Center as a Service (CCaaS) market. The report describes deal size records being broken, high double-digit ARR growth, and approximately 100% year-over-year growth in customers with more than $100K in ARR. Spruce Point presents it as one of the fastest-growing and least-appreciated parts of Zoom's expanded platform.

How does Zoom trade relative to its peers and its own financials?

Based on FY2027 Street consensus estimates, Zoom trades at 4.1x revenue, 9.5x EBITDA, and 16.1x free cash flow — a 13–31% discount to comparable software peers. That discount exists despite FY2026 GAAP gross margins of 77%, GAAP net profitability of 39%, and a 40% free cash flow margin. Spruce Point argues those metrics typically command premium multiples, not discounts.

What is the upside target and what would need to happen to get there?

Spruce Point estimates 40% to well over 100% upside in Zoom shares. Catalysts include a revenue growth inflection above consensus, continued enterprise customer expansion, online segment stabilization, monetization of AI Companion, growth in Phone, Contact Center, and Workvivo, formal recognition of the Anthropic stake in the company's valuation, and potential management and board action on Spruce Point's recommendations — which the firm says it has already shared with Zoom's Board.

Disclaimer: This summary is not primary research and does not constitute investment advice. It is a brief overview of a detailed equity research report authored by the firm, organization, or source referenced in this article or at https://www.sprucepointcap.com/research/zoom-communications-inc?ref=shortreport.fyi, which contains extensive evidence, regulatory filings, and analysis; readers are encouraged to review the full report there for a comprehensive understanding. The content provided in this publication is not authored or originated by us — we act solely as a distributor and do not endorse, verify, or take responsibility for the accuracy, completeness, or reliability of the information presented. This publication is for informational purposes only and should not be construed as legal, business, investment, or tax advice. Always conduct independent due diligence and consult qualified professionals before making any decisions based on the information contained herein. We disclaim all liability for any loss or damage arising from reliance on third-party content, and the views expressed are solely those of the respective source and do not necessarily reflect our own.