Soft Software Bookings, AI Mania and the Coming Economic Bailout
Soft Software bookings
March quarter Software bookings will be soft, but few companies report bookings, which means revenue for June and Sept Qs could be soft, certainly slower growth year-over-year versus 2024 year-over-year growth.
Software companies published conservative 2025 guidance. The question is, how many will miss on the reported Revenue number, or be required to lower guidance, or say the year will be more back-end loaded than initially planned when March quarter is reported? Ditto for when the June Q is reported.
How much pricing power will Enterprise Software companies continue to have as the year progresses? Will 2026 Revenues suffer as a result of not being able to exercise price increases in 2025 to the extent that price increases have been exercised since 2021? Enterprise Software companies have less pricing power today versus 6-12 months ago.
Economic bailout coming later this year before June 30th
Rather than allow an economic soft patch to play out, my guess is that we will see a significant Fed Funds rate cut (Powell will cave) and a Trump “dividend” / stimulus check before June 30th. This will only cause more price inflation.
Unfortunately, the U.S. economy is too over-leveraged, and until Washington is willing to cut Social Security and Medicare (and the related payroll taxes in a morally just world), prices will move higher and Real economic output will be flattish.
AI mania. Where’s the beef?
On the AI side, I am aware of people using LLMs for office productivity use cases (reviewing documents; creating templates, outlines and presentations; data extraction; due diligence; calendar management; etc.) as well as for writing and reviewing chunks of code (I found OpenAI and Anthropic useful across these use cases and there will be significant improvement on the coding side).
My sense is that the next step will be to make it easier for business users to create AI agents to automate workflows, sort of the next iteration of robotic process automation. However, at some point AI product/application revenue has to justify the infrastructure spend. Thus far we are talking about low double-digit billions of product revenue against cap ex spend that is astronomical. In other words, it can’t continue to be only the chip companies and OpenAI who generate meaningful Gen AI revenue for this pace of infrastructure spend to continue.