Zoom vs Microsoft

Eric Yuan grew up in Shandong Province, China. His girlfriend — later his wife — lived in a city ten hours away by train. Yuan later said that riding that train repeatedly as a young man, he would think: "What if I could see her without travelling?" The question stayed with him. It became the founding motivation for Zoom, which Yuan would not create for another 24 years.

Yuan had joined Cisco through its acquisition of WebEx in 2007 and became one of the company's most senior engineers. By 2011, he was frustrated: WebEx customers consistently told him the product was difficult to use and unreliable. Yuan proposed building a new video platform from scratch. Cisco declined. Yuan left, taking 40 engineers with him, and founded Zoom in 2011. Cisco, his former employer, became one of his main competitors.

When COVID-19 forced global lockdowns in March 2020, Zoom became the de facto communication platform for hundreds of millions of people simultaneously. Daily meeting participants grew from 10 million in December 2019 to 300 million in April 2020. "Zooming" became a verb. Zoom's stock rose 500% in 2020. Eric Yuan became a billionaire many times over.

As pandemic restrictions lifted and people returned to offices, Zoom's growth rate collapsed. The company had hired aggressively during the boom and laid off 15% of its workforce in February 2023. The stock fell over 85% from its 2020 peak. Zoom remained a large, profitable business — but the extraordinary circumstances that had briefly made it one of the most important companies in the world had passed. Eric Yuan took a 98% pay cut in 2023 in an unusual display of corporate accountability.

Zoom reported full-year fiscal 2025 revenue of $4.67 billion — modest 3% growth — but with non-GAAP operating margins of approximately 40%, making it one of the most profitable software companies of its size. The company rebranded from "Zoom Meetings" to "Zoom Workplace," integrated an AI Companion 3.0 capable of agentic task execution, and expanded into Zoom Phone and Contact Center. AI Companion adoption grew fourfold in a year. The company entered fiscal 2027 targeting its first $5 billion revenue year. The question facing Zoom — as for every legacy SaaS company — was whether AI would make the product indispensable again, or whether it would simply slow the pace of irrelevance.

In January 1975, Paul Allen showed Bill Gates an issue of Popular Electronics featuring the Altair 8800. Neither of them had written a BASIC interpreter for it. But Gates called MITS and told them Microsoft had a working version ready. They then had eight weeks to actually build it. It worked. Gates was 19.

IBM approached Microsoft in 1980 to write an operating system for its new PC. Microsoft didn't have one. Gates bought QDOS from a Seattle programmer for $50,000, renamed it MS-DOS, and licensed it to IBM — while retaining the right to license it to other manufacturers. IBM thought hardware was the business. Gates understood it was software. The decision made Microsoft the most powerful company in computing for the next two decades.

When Satya Nadella became CEO in 2014, Microsoft was widely regarded as a company that had missed mobile, missed search, and missed social. Nadella pivoted to cloud computing, transformed Microsoft's culture from internal competition to growth mindset, and repositioned Azure as the foundation of the enterprise. The market cap tripled in his first five years. The transformation is studied in business schools as one of the greatest corporate turnarounds in history.

Microsoft invested $10 billion in OpenAI in January 2023, securing exclusive access to GPT-4. Within months, "Copilot" had been embedded in Word, Excel, Teams, GitHub, and Bing — repositioning Microsoft as the leading AI company in enterprise software. By early 2025, Microsoft's AI business had crossed $13 billion in annualised revenue, growing 175% year-over-year.

By Q3 fiscal 2026, Microsoft's AI business had surpassed $37 billion in annualised revenue — growing 123% year-over-year. Azure revenue grew 40%. Microsoft 365 Copilot had over 20 million paid seats, with the number of enterprise customers deploying more than 50,000 seats having quadrupled year-over-year. Cloud revenue crossed $50 billion in a single quarter. Microsoft had extended its OpenAI partnership, securing a 27% stake in the company and cementing its position as the most important distribution partner for large language models in enterprise software.