Dear CIO,
It is easy to get caught up in the narrative that AI is replacing everything. But what we are actually seeing is more nuanced: AI is compressing growth in certain sectors, reshaping demand, and exposing vulnerabilities in business models that once felt unshakable. Two recent market moves from monday.com and Gartner bring this reality into focus.
Best Regards,
John, Your Enterprise AI Advisor
Compression of Software & Analysts
How AI Is Compressing Growth, Eroding Moats, And Reshaping Demand
Key Case Studies: monday.com and Gartner
monday.com reported solid Q2 results with 27% revenue growth, but it guided Q3 a touch below expectations. After the report, the stock promptly fell 26%, based on the growing belief that integrated AI tools inside Microsoft 365, Google Workspace, and email clients could gradually absorb monday.com’s functionality. If so, standalone task management apps start looking optional.
Gartner, meanwhile, cut its 2025 revenue forecast due to weaker demand in its core research unit. It cited macro softness, but many industry observers point to enterprise buyers leaning on LLMs for early-stage research instead of analyst reports. As a result, broad-seat analyst subscriptions, Gartner’s bread and butter, are facing fresh skepticism.
The Broader Pattern
This is not an isolated phenomenon. A few more examples highlight the scope of AI’s reshaping force:
Adobe is facing investor pushback over Firefly’s monetization potential in the face of stiff competition from OpenAI and Google.
Salesforce is hearing customer complaints of “AI decision fatigue.” Its tangible returns from tools like Agentforce remain modest.
Getty & Shutterstock just announced a $3.7B merger as AI-generated imagery puts pressure on stock photo businesses.
Duolingo let go of 10% of its contractors after shifting to AI-generated learning content.
Chegg was one of the earliest to sound the alarm, warning that ChatGPT was eating into its user base. It has been struggling ever since.
What's Really Happening?
The reality is that AI is compressing rather than destroying. Here’s how:
Commoditization: AI can now do the basics across many tools like summarization, task management, and note-taking. That puts pressure on any company offering just those features.
Budget Shifts: CIOs are prioritizing spend on AI infrastructure like training data, compute, and orchestration, and leaving less room for incremental SaaS expansion.
Platform Bundling: Microsoft, Google, Zoom, and others are baking AI into their existing tools at no extra charge, making it a tough proposition for adjacent vendors trying to justify standalone value.
Uncertain Economics: Inference costs are still high. Many AI features don’t yet show clear ROI, which creates hesitation and margin pressure.
Analyst Firms Are Feeling It Too
Wall Street and enterprise research providers are not immune:
Sell-side analysts increasingly rely on LLMs for transcript reviews and alerting, reducing the need for junior staff, but still leaning on humans for nuance.
Enterprise research is seeing a shift, too. Generic inquiries are now answered by tools like ChatGPT, decreasing the appeal of expensive, broad-access subscriptions.
Still, it’s not all bad news. Some institutions are investing in AI-native analyst teams, an indication that the analyst role is evolving, not disappearing.
What Comes Next?
SaaS growth is expected to keep slowing. Analysts now forecast average top-line growth dipping toward 9% in 2025. Valuations will come under additional pressure as more companies move from seat-based pricing to usage-based models, which are harder to scale and harder to forecast.
AI is not killing all software or analyst roles. But it is compressing margins, slowing growth, and redistributing value. The most vulnerable are Single-feature SaaS apps built on generic content and broad research providers. The more resilient are systems of record, platforms with strong distribution, and companies that own proprietary data. In this environment, winners will be the ones who embed AI into their core workflows or own the interfaces through which AI is consumed.
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