In this month’s memo, we look back on a historic year for AI and software and outline the key questions that will shape 2026—from the evolution of frontier models and AI agents to pricing, growth durability, and the growing divide between AI-native leaders and incumbents.
Here’s a preview:
- Model progress is converging, not stalling: Capability gains continue across reasoning, coding, and multimodality, even as the AI landscape consolidates around a small set of leading labs.
- AI agents are gaining real traction: 57% of organizations now have agents in production (67% among large enterprises), expanding software TAMs across code, support, IT, sales, and vertical workflows.
- AI-native growth is unprecedented: Startups are reaching $100M+ ARR in record time, compressing a decade of scale into just a few years, and raising new questions about durability.
- Incumbents are under pressure: Public software multiples remain near decade lows as investors push for clearer evidence that AI is driving revenue growth and margin expansion.
- Pricing models are evolving: Hybrid approaches that blend platform commitments with AI consumption are emerging as the dominant framework.