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As we return from the long weekend, we’re preparing for a resumption this week of one of tech’s big debates: whether AI is killing enterprise software. Salesforce, Snowflake and Asana are each reporting earnings for the first fiscal quarter in the next few days, providing us with an update on how they’re doing in selling their own AI tools—and whether AI startups are taking any business from them.
Here’s a prediction: Executives from each will gush about how AI is transforming their businesses in a good way, regardless of what the numbers show. That’s what Workday co-founder and CEO Aneel Bhusri did last Thursday, when the long-established seller of human resources software reported earnings. He declared: “With AI, we are essentially a startup again.” Bhusri didn’t mean Workday’s revenue has shrunk to that of a newly launched firm, of course. Instead, it is moving quickly to offer AI-powered services to its customers. In the quarter, that helped sharply lift the pace of new contracts it signed, the company reported.
That’s not yet showing up in Workday’s year-on-year revenue growth, which was 13.5% in the quarter, a point below the previous quarter’s growth rate. And the company projected a slightly slower rate of growth in subscription revenue—which makes up most of its top line—for the second quarter. Nevertheless, investors liked Workday’s talk of new AI products and sent the stock up. The same thing happened with Zoom Communications, which also reported on Thursday, showing another quarter of slightly accelerating (but still tepid) growth.
Neither companies’ results suggested any SaaS apocalypse type of AI disruption. But the Workday numbers in particular flagged something we’ve seen before in software results: Reported contributions from new AI-related revenues don’t appear to be boosting revenue growth overall, which implies the AI money is replacing revenue elsewhere. Workday, for instance, reported $500 million of annualized revenue from AI agents.
Separately, there are signs that corporate buyers of enterprise software are pulling back a bit from how they use established software. As we reported last week, some businesses want to sign shorter contracts with their software suppliers than has been the case—we cited examples of companies switching to deals of between one and three years instead of five.
These customers want the flexibility to switch to different suppliers if they offer better AI features over time. We also pointed out that some businesses have negotiated opt-out provisions that let them get out of a deal early if a software supplier doesn’t have AI apps that meet certain benchmarks.
What all this means is that the impact of AI on existing software firms will take several years to play out, and some firms will come out of the transition better than others. As for this week’s earnings updates, here’s what analysts are expecting for revenue and earnings per share growth, with estimates courtesy of S&P Global Market Intelligence.
Salesforce (Wednesday)
Revenue: $11.05 billion +12.5%
Earnings per share: $1.76 +9.3%
Snowflake (Wednesday)
Revenue:$1.323 billion +27%
EPS: (83 cents) compared with ($1.29)
Asana (Thursday)
Revenue: $203 million +8.4%
EPS: (13 cents) compared with (17 cents)
In Other News
• Microsoft consumer chief marketing officer Yusuf Mehdi will leave the company next year, he announced late Thursday. Mehdi is a 34-year veteran of Microsoft, but since 2023 he has overseen marketing for its consumer-focused products, including its Surface devices and the consumer versions of Windows and Office software.
• Meta Platforms has quietly launched a new app called Forum, part of a new push by the Facebook owner to put out a lot of new apps. Forum lets users select topics they’re interested in and customize their feed by choosing which topics they want to see more or less of, according to its Apple App Store listing. Those recommendations are based on account activity and summarized using AI.
• The U.S. House Committee on Oversight and Government Reform opened an investigation into insider trading on Polymarket and Kalshi, warning that lawmakers may take action against the prediction markets.
• SpaceX held the first launch of the new version of its Starship spacecraft on Friday, successfully sending the craft from its Starbase Texas headquarters to space, where it deployed 22 test satellites. While the launch had some hitches, including an engine failure and an uncontrolled landing of its first stage booster, SpaceX touted the launch as a success.
• The White House is nearing a deal with Anthropic that allows the National Security Agency and other U.S. spy agencies to use the company’s advanced AI models for classified work, according to the New York Times.
Friday on The Information’s TITV
Check out today’s episode of TITV in which we discuss our reporting on Microsoft’s latest strategy for handling the AI agent data wars.
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