AI Moves to Production
The Stack Weekly: Budgets are shifting fast as enterprise buyers stop piloting and start paying for AI that actually ships, scales, and shows ROI.
The Stack: Weekly Strategic Signals for Leaders Building What’s Next in AI and Software.
Capital & KPIs: Databricks’ $134B raise shows capital markets are only paying premium multiples for AI platforms with real revenue, not AI narratives layered onto legacy stacks.
Enterprise Buyer Behavior: SOC 2 has become a hard gate in enterprise buying, quietly killing deals before pricing or product differentiation ever enters the conversation.
Product & AI Bets: Enterprise AI spending has shifted from pilots to production, with nearly half of deals going live and budget flowing fastest to products that prove value immediately through bottom-up adoption.
Moats & Models: The Great Re-Bundling is accelerating as buyers abandon point solutions in favor of suites that trade best-in-class features for simplicity, control, and pricing leverage.
Each section also includes ‘other signals on our radar.’
Write back and let us know if you’d like to see more details on any of those.
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1. Capital & KPIs
Databricks Raises $4 Billion at $134 Billion Valuation
What Happened
On December 16, 2025, Databricks announced a Series L funding round raising more than $4 billion at a $134 billion valuation, led by Insight Partners, Fidelity Management & Research Company, and J.P. Morgan Asset Management. The valuation represents a roughly 34% increase from the company’s August 2025 round at $100 billion. With one of the largest private funding rounds ever raised by an enterprise software company, Databricks further strengthened its balance sheet and long-term growth runway.
The company reported that it surpassed a $4.8 billion annual revenue run rate in fiscal Q3, growing more than 55% year over year. Databricks also disclosed over $1 billion in annualized revenue from AI products and more than $1 billion from data warehousing, indicating meaningful scale across multiple product categories. In addition, Databricks now has over 1,000 customers using its Lakebase database offering, with management noting continued momentum and acceleration relative to prior quarters.
Why It Matters
This round resets expectations for what “AI leadership” actually means in capital markets. Databricks is being valued not as a data infrastructure company, but as an AI-native platform with proven monetization, and the distinction matters. Investors are clearly rewarding companies that can show material AI revenue alongside durable core platform revenue, not just AI features layered on top of legacy products. The timing is also telling: Databricks is raising at a massive step-up valuation while adjacent data players are opting to sell, reinforcing that the market is drawing a sharp line between AI-forward platforms and commoditizing infrastructure. For enterprise buyers, the signal is durability. This is a vendor with the balance sheet and mandate to out-invest peers in agentic workflows, data infrastructure, and long-term roadmap execution through 2026.
Implications for You
Valuation expectations just moved up. If you pitch AI without real revenue behind it, expect immediate skepticism from investors and boards.
AI monetization must be explicit. You need clean reporting on AI attach, expansion, and margins, not bundled storytelling.
Platform depth beats single-feature AI. Investors are favoring companies that pair AI with a sticky system of record or execution layer.
IPO timelines can compress quickly. Late-stage companies should assume readiness matters earlier than planned and act accordingly.
Enterprise buyers should plan for vendor leverage. Well-capitalized platforms will push bundling and pricing power, so contracts need stronger guardrails now.
Other Signals on our Radar:
Crisp Raises $26M to Scale Vertical AI for Retail and Supply Chains
Crisp closed a $26 million Series B1 round led by Paine Schwartz Partners, with participation from Blue Cloud Ventures, FirstMark Capital, Cox, DNX, Prologis, and Wellington Management. The company has now raised $127 million since inception and supports more than 7,000 brands with AI tools for inventory optimization, assortment planning, and e-commerce performance. The round reinforces investor conviction that vertical, industry-specific AI platforms can deliver stronger unit economics and defensibility than general-purpose AI at scale.
2. Enterprise Buyer Behavior
SOC 2 Compliance Becomes Non-Negotiable in B2B Deals
What Happened
Multiple industry reports and practitioner commentary published in 2024–2025 indicate that SOC 2 compliance has shifted from a differentiator to a baseline requirement for many B2B SaaS vendors, particularly those handling customer or sensitive data. Industry surveys and security-focused commentary suggest that a clear majority of B2B buyers now expect vendors to provide a SOC 2 report as part of pre-contract diligence, up from a materially smaller share earlier in the decade, signaling a tightening of security expectations.
Enterprise procurement and vendor-risk teams are increasingly standardizing security questionnaires in which the absence of a current SOC 2 Type II report can materially hinder or disqualify vendors, especially in regulated industries such as financial services and healthcare. Security practitioners consistently report that sales cycles frequently slow or stall during vendor risk reviews when SOC 2 documentation is missing, while vendors with current SOC 2 Type II reports, ISO 27001 certification, and well-documented security controls generally move through procurement and security review more quickly.
Why It Matters
SOC 2 has quietly moved from a trust signal to a hard gate in enterprise buying. For a growing share of B2B deals, especially those involving sensitive or regulated data, security review now functions as a binary filter rather than a differentiator. Vendors without a current SOC 2 Type II report increasingly never reach price or product comparison, regardless of feature strength. This embeds security friction directly into the sales motion, elongates cycles, and raises CAC for noncompliant vendors, while advantaging companies that invested early in compliance infrastructure. For buyers, SOC 2 standardization shifts diligence effort away from baseline controls and toward higher-order vendor risk, but it also narrows the viable vendor pool earlier in the process.
Implications for You
Security is now a revenue gate, not a checkbox. Without SOC 2, deals stall or die before commercial conversations begin.
Sales cycles are structurally longer. Missing compliance artifacts can add months to enterprise deals, inflating CAC and forecast risk.
Compliance investment has direct ROI. SOC 2 spending increasingly pays back through faster closes and higher win rates.
Sales qualification must tighten. Security requirements should be disqualified early, not discovered late in procurement.
Procurement leverage shifts upmarket. Buyers can treat SOC 2 as baseline and focus negotiations on risk, resilience, and vendor viability.
Other Signals on our Radar:
SaaS Procurement Shifts From Cost Control to Value Architecture
A November 2025 SaaSrooms framework shows enterprise SaaS procurement moving beyond cost cutting toward managing software as a value architecture. Procurement teams are shifting from traditional metrics like unit price and vendor count to KPIs tied to business impact, including productivity gains, revenue enablement, risk reduction, and AI leverage. The change reflects tighter budgets paired with higher expectations that SaaS investments directly support strategic outcomes rather than standalone efficiency savings.
3. Product & AI Bets
Enterprise AI Spending Surges to $37 Billion, 47% of AI Deals Reach Production
What Happened
Menlo Ventures released “2025: The State of Generative AI in the Enterprise” on December 14, 2025, based on survey data from nearly 500 U.S. enterprise decision-makers alongside market analysis. The report finds that enterprise spending on generative AI reached $37 billion in 2025, up from $11.5 billion in 2024, representing roughly 3x year-over-year growth. More than half of that spend—$19 billion—flowed to the application layer, with AI applications accounting for about 6% of overall software spend just three years after the launch of ChatGPT.
The report shows that 47% of AI deals progress to production, compared with 25% for traditional SaaS, which Menlo attributes to higher buyer intent and clearer near-term value. Most organizations identify 10 or more potential AI use cases, but concentrate adoption on initiatives tied to immediate productivity gains or cost savings. While enterprises cite slightly more internal-facing use cases (59%) than customer-facing ones (41%), both move through the pipeline at nearly identical rates.
Product-led growth is a defining feature of enterprise AI adoption: 27% of AI application spend comes through PLG motions, nearly four times the rate seen in traditional software. Menlo also finds that individual users are driving AI adoption within enterprises at roughly 4x the pace of traditional software, often initiating usage ahead of centralized procurement processes.
Why It Matters
This data confirms that enterprise AI has exited the experimentation phase and entered a true budget reallocation cycle. A $37B spend level with nearly half of deals reaching production indicates buyers are showing up with intent, not curiosity, and are willing to operationalize AI when value is immediate and legible. The fact that AI applications already represent roughly 6% of total software spend only three years after ChatGPT underscores how quickly AI is displacing traditional SaaS budget rather than merely adding to it. Just as important, adoption is being pulled bottom-up through PLG and individual users, not pushed top-down through procurement, reshaping how enterprise software is discovered, validated, and scaled. For SaaS leaders, the bar is no longer proof of concept success but proof of production impact, fast time-to-value, and a credible path from individual usage to enterprise-wide standardization.
Implications for You
Production is the new proof point. AI vendors will be judged on live deployments, not pilots or demos.
Time to value is decisive. Products that deliver immediate productivity wins capture budget fastest.
PLG is now enterprise-critical. Bottom-up adoption is a primary GTM motion, not an edge case.
Expansion matters more than entry price. High production rates favor land-and-expand over slow, top-down sales.
User pull beats procurement push. Products must be usable and valuable before centralized buying steps in.
Other Signals on our Radar:
Microsoft Copilot Sets the Playbook for AI-Driven ARPU Expansion
December 2025 analyses show Microsoft successfully using Copilot to lift ARPU by embedding AI directly into core productivity subscriptions rather than selling it as a standalone add on. Folding Copilot Pro functionality into Microsoft 365 Premium increased adoption, reduced churn, and pushed users toward higher value tiers. The strategy is landing in a market already tolerant of price increases, with SaaS subscriptions up 11.4% in 2025. With 66% of CEOs reporting operational benefits from Copilot, Microsoft is proving that AI bundling can justify higher prices when productivity gains are tangible, creating a template other SaaS vendors are now under pressure to follow.
4. Moats & Models
The Great Re-Bundling of 2025
What Happened
Market analyses and practitioner commentary from 2024–2025 indicate a clear shift in enterprise software buying away from fragmented, best-of-breed point solutions and toward more integrated suites and platforms. This trend represents a partial unwind of the 2015–2020 era, when specialized SaaS tools proliferated across workflows and left large enterprises managing hundreds of applications. The consolidation push is being driven by rising integration and maintenance complexity, vendor sprawl, siloed data that limits enterprise-wide analytics, and tighter budgets forcing portfolio rationalization.
The shift is most visible in marketing, HR, and sales technology. Marketing organizations that previously ran highly fragmented stacks are increasingly consolidating around a smaller number of core platforms such as HubSpot, Salesforce Marketing Cloud, and Adobe Experience Cloud. In HR, standalone point solutions are being absorbed into unified HCM suites like Workday, SAP SuccessFactors, and Oracle HCM. In sales, CRMs are expanding to bundle sales engagement, forecasting, and revenue operations capabilities that were previously handled by separate vendors.
Why It Matters
The Great Re-Bundling signals a structural change in how enterprises assign software budgets and tolerate complexity. Buyers are no longer optimizing for best-in-class features at the workflow edge; they are optimizing for fewer vendors, cleaner data models, and lower integration overhead. As budgets tighten and security and governance scrutiny rises, platforms that can cover 70–80% of requirements are increasingly preferred over point solutions that are marginally better but operationally costly. This reverses a decade of point-solution sprawl and shifts power back toward suite vendors, fundamentally raising the bar for standalone products. For SaaS leaders, the implication is stark: being “better at one thing” is no longer sufficient unless that advantage is mission-critical and non-substitutable.
Implications for You
Platform gravity is increasing. Suites with broad coverage now win by default unless a point solution delivers step-change value.
Point solutions face existential pressure. Overlapping features are being retired first during stack rationalization.
Build vs buy decisions are tilting toward buy. Platforms are more likely to acquire than build marginal capabilities.
Differentiation must be extreme. Point vendors need 10x outcomes or deep vertical specificity to survive.
Procurement leverage shifts to incumbents. Fewer vendors mean more pricing power for platforms and tougher renewal dynamics.
Other Signals on our Radar:
Vertical SaaS Consolidation Accelerates as Industry Platforms Earn Premium Valuations
December 2025 market reports show consolidation concentrating around vertical SaaS platforms, even as overall software M&A volumes remain muted. GP Bullhound and Windsor Drake both identify vertical SaaS as the strongest M&A theme, with assets commanding premium valuations. Buyers are prioritizing industry specific platforms that embed deeply into workflows, regulation, and operating models, turning software into an operational hub rather than a feature set. This depth creates defensible moats that horizontal platforms struggle to match, making vertical leaders increasingly attractive acquisition targets.
The Stack is a weekly intelligence brief for leaders building what’s next in AI and software. We deliver high-impact developments shaping the U.S. market: what happened, why it matters, and what to do about it. Each issue distills complex shifts into decision-grade insight.
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