The Norwegian election unfolded as anticipated in last week’s blog, with the country shifting even further left. Several business leaders reacted with sorrow; some lowered the flag to half mast, and several expressed strong emotions about the outcome. One investor claimed the public sector’s share of the economy would surge to 70% in the next parliamentary term, up from 62.5% today—a clear exaggeration. To assume the public sector will grow above 65% over the next four years seems unlikely. That being said, such a large public sector is unusual in the Western world and has implications for the economy’s capability to grow.
As investors, we must stay grounded amid emotional narratives and inflated forecasts. Today, the focus shifts to enterprise software, a challenged sector in the market, as we explore the real implications AI presents to this space.
Is AI eating enterprise software?
Software as a Service (SaaS) companies have experienced a rough time in the market. Salesforce (CRM) is down 27% year-to-date (YTD), Adobe (ADBE) is down 21%, and ServiceNow (NOW) is down 12%. Clearly, market participants believe AI will disrupt these companies' business models. In short, the narrative goes something like this: Rather than requiring users to navigate multiple applications, AI systems promise task fulfillment based on natural language requests, tailoring features on demand. The practical implication is a potential reduction in the number of discrete software tools people need, and a shift towards AI interfaces capable of executing a wide variety of custom functions.
There can, of course, be something to this. However, investors should not exaggerate its implications both in the short and long term. Across these three companies, recent earnings reports instead reveal that AI has become a feature that drives growth, not erodes it. Recent results show that AI investments have accelerated adoption, expanded recurring revenue, and bolstered subscription growth. Core business models remain strong, with performance tied to AI integration rather than cannibalization.
AI as a value add-on
Last week, ADBE posted record revenue, powered by strength in digital media subscriptions, with 10% year-over-year growth (YOY). AI-influenced ARR has surpassed $5 billion, but these AI features (such as generative fill in Creative Cloud) act as retention and upsell engines, not standalone replacement products. Adobe raised guidance on both revenue and EPS, and management highlighted that the “AI flywheel is spinning”—yet the business model is demonstrably subscription-based, with customers willing to pay for trusted tools that add AI capabilities alongside, not instead of, established workflows.
The management writes this as a counter to the challenge: “As AI transforms consumer behavior, it’s reinventing marketing and customer experience. Brand discovery is shifting from primarily search to include generative engine optimization. AI becomes the new UI, guided by conversations rather than menu clicks. Brands must deliver hyperpersonalized, immersive experiences on owned channels to drive engagement and loyalty. In this new reality, Adobe uniquely offers an integrated customer experience platform that delivers automation, agility, and scale.”
The bottom line is that when a business expands revenues by 10% YOY, it hardly speaks volumes on its imminent death.
AI supercharges enterprise workflows
NOW’s latest earnings “blew out” expectations, with Q2 revenue up 23% YOY and subscription revenue up 22%, fueled by its platform’s AI-driven automation features. The company’s agentic-AI platform is marketed as a mission-critical enhancement that refactors—but does not erase—enterprise workflows. Large deal activity increased, customer retention remained high, and the number of $20M+ ARR customers grew by 30% YOY. AI is framed as a productivity booster, leading to more deals and relatively little evidence of software displacement within its installed base.
Bill McDermott, the CEO of NOW, has repeatedly stated that AI is the new user interface. The shift is evolutionary rather than purely disruptive: software becomes embedded or refactored within AI-augmented platforms, with human productivity and workflow orchestration at the center.
Again, NOW’s growth is accelerating, not slowing down. There is no eating going on here; AI is bolstering NOW’s value proposition, not the other way around.
AI is table stakes, not a disruptor
Last week, CRM reported solid revenue growth and strong remaining performance obligations (RPO) expansion, with Agentorce and data cloud as notable AI enhancements. AI revenue is now running at a $1.2 billion ARR, a significant development given that Agentforce was launched half a year ago. However, market signals indicate that investors want even higher AI monetization: guidance fell short of many expectations, and share buybacks have been expanded in response to muted top-line acceleration. Nevertheless, CRM grows its topline at a run rate around 10%, and this can hardly be seen as a catastrophe. There is no evidence that customers replace legacy apps. Rather, AI is steadily boosting productivity as an essential value-adding layer integrated into the CRM ecosystem, enhancing capabilities without replacing core software.
Marc Benioff, CRM’s CEO, has responded directly to negative sentiment and AI “disruption” fears by calling the notion of AI spelling the end of SaaS “nonsense.” Benioff emphasizes: “Looking at my own business and our customers, I can’t think of anything that could replace enterprise SaaS right now.” He remains optimistic about CRM’s model, highlighting real customer demand and dismissing the imminent emergence of Artificial General Intelligence (AGI) as hype.
Conclusion
In summary, none of these flagship enterprise software firms show evidence that “AI is eating software.” Instead, AI serves as a toolkit for enhancing workflow, expanding value, and accelerating revenue within proven business models. Enterprise customers are incrementally adopting new AI features alongside existing ones, and the latest earnings reports confirm continued strength rather than existential threat across Adobe, ServiceNow, and Salesforce.
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Very interesting as always Magnus. With the political move left, is there any proposal to increase dividend withholding tax from 25%?