A day of reckoning for the AI boom

Welcome to Runtime! Today: Strong AI-driven earnings weren't enough to prevent enterprise software investors from voting with their feet, plunging stock prices aren't enough to deter another round of investment in OpenAI, and the latest enterprise moves.

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Red wedding

Now that generative AI seems to be finally getting traction inside the enterprise, the debate has shifted: Will the old-guard vendors be able to adapt to this new world, or will a swarm of hungry upstarts eat their lunch before they can pivot? Wall Street made its position clear Thursday.

Shares of enterprise software companies fell sharply across the board despite strong quarterly revenue growth from companies like Microsoft and ServiceNow on concerns that AI-native companies are poised to take them down. According to CNBC, shares of the iShares Expanded Tech-Software Sector ETF, which tracks enterprise software companies, have now erased nearly all the gains they made over the past year.

• Microsoft shares fell nearly 10% after it reported Azure growth of 39% Wednesday, an extremely strong result under most circumstances but a decline from growth of 40% in the previous quarter.
• Investors seemed particularly spooked after Microsoft disclosed (for the first time) that OpenAI makes up 45% of future business under contract, or roughly $280 billion.
• Microsoft spent much of 2025 trying to reduce its reliance on OpenAI — in part because nobody really knows how OpenAI is going to generate enough revenue to cover the infrastructure-spending pledges it has made over the last several years — but 45% is still a lot of eggs in one basket.
• And the fact that Microsoft's capital expenditures for the previous quarter came in more than $1 billion above expectations at $37.5 billion set off a chain of worries that cloud growth is slowing right as spending is increasing and skepticism around OpenAI's future has never been higher.

Microsoft wasn't the only Big Tech incumbent to signal this week that managing the AI boom is getting really expensive.

• Amazon laid off 16,000 employees Wednesday, bringing the total number of people discarded by the company since last October to 30,000 and affecting a wide swath of AWS business units.
• Google Cloud is raising prices on egress fees starting in May, just two years after making a big stink about how brave it was for ending transfer fees (which was pretty much mandated by the European Union).
• And TD Cowen thinks Oracle will have to lay off tens of thousands of employees and sell Cerner in order to pay for the data centers it insists it plans to build for OpenAI, according to The Register.

Still, as Runtime pointed out earlier this month, it is going to be much harder than a lot of people think to rip long-established enterprise software vendors out of big companies. The Information reported Tuesday that J.P. Morgan has no plans to change its relationship with its vendors and noted that Anthropic itself is hiring for roles that value experience with stalwarts like Salesforce and Workday as it grows.

• But enterprise tech brought this week's sell-off upon itself after three years of breathless hype that generative AI was going to disrupt everything; why wouldn't generative AI therefore disrupt it as well?
• "It is a little embarrassing that in 10 days, Anthropic was able to invent [Claude Cowork], put it out and everybody ... could look at it and go, ‘Wow, why isn’t Microsoft doing that?" as Melius Research's Ben Reitzes said on CNBC.
• Still, it's clear that Wall Street doesn't understand the reluctance of enterprise CIOs to trust startups with mission-critical data or value the expertise needed to run SaaS reliably at scale as much as the shiny new thing.
• And even after this week's sell-off, according to the ETF cited by CNBC above shares of enterprise software companies have nearly doubled since the launch of ChatGPT.

Meanwhile…

Charges that the hyperscalers and Nvidia are just passing money around between friends won't go away if Nvidia, Amazon, and Microsoft follow through on plans to invest even more billions in Sam Altman's reality-distortion field. The Information reported Wednesday that the three companies are in talks to invest as much as $60 billion combined into OpenAI's money furnace, which would value the company at $730 billion — more or less what Samsung is worth.

Nvidia could throw as much as $30 billion into the fire, according to the report, whereas Microsoft and Amazon are said to be looking at more modest sums (so to speak) around $10 billion to $20 billion. And because Masayoshi Son can't stand to watch anybody else light money on fire without getting personally involved, Softbank is said to be preparing as much as $30 billion in additional funding itself for the incinerator.

"If this extraordinary funding round comes together, it would calm investors worried about the company’s cash burn," according to The Information, which calls to mind the joke about feeding cats to coyotes. But The Wall Street Journal reported late Thursday that OpenAI is looking at going public in the fourth quarter of this year, which might allow the three companies to spend that money elsewhere.

Enterprise moves

Ayman Antoun is the new CEO of OpenText, joining the information management company after 35 years at IBM, most recently as president of IBM Americas.

Brandt Urban and Tony Colon are the new chief business development officer and chief customer officer, respectively, at Veeam.

The Runtime roundup

SAP added to the enterprise software gloom Thursday after reporting a slowdown in future bookings and revenue growth.

Perplexity added Microsoft to its roster of cloud providers in a $750 million deal after Amazon — its preferred cloud provider — sued the AI search company for allowing users to shop for Amazon's wares without visiting its web site, according to Bloomberg.

Thanks for reading — see you Saturday!