Greetings,

I wanted to flag a story this week on the reality check hitting the enterprise AI market. Microsoft and other major software players have been positioning 2025 as the year complex, multi-step AI agents would take off, automating significant tasks for businesses. But as the year closes, our reporting, led by Aaron Holmes, shows Microsoft is having to dial back expectations for how quickly customers will actually spend money on these newer products.

Why it caught my eye:

• Rare Quota Reduction: In a highly unusual move for Microsoft, the company has lowered the sales growth targets—or quotas—for certain AI products for multiple sales divisions in its Azure cloud unit. This comes after many salespeople failed to meet their goals in the last fiscal year.
• Customer Resistance: The core issue is that corporate customers are pushing back. They are struggling to measure the return on investment (ROI) from using the technology.
• The Carlyle Example: Private equity firm Carlyle reduced spending on Microsoft's Copilot Studio. This happened after they had trouble getting the AI to reliably tap data from other applications.

This is more than just a Microsoft story—it reflects a broader trend of enterprise software firms, like Salesforce, adjusting to the challenge of making advanced AI truly work for traditional businesses and get them to pay up. Read Aaron's full article to understand the implications for the entire AI ecosystem.

Best,

Jessica Lessin
Founder & Editor-in-Chief

Microsoft Lowers Sales Staff's Growth Targets For Newer AI Software

Executives at Microsoft and other enterprise software firms heralded 2025 as the year artificial intelligence would be capable of automating tasks that involve multiple steps, such as generating dashboards based on company sales data. But as the year comes to a close, Microsoft has lowered expectations for how quickly it can get customers to spend money on these newer products, known as agents.

Multiple Microsoft divisions, for instance, have lowered how much salespeople are supposed to grow their sales of certain AI products after many of them missed sales-growth goals in the fiscal year that ended in June, according to two salespeople in Microsoft's Azure cloud unit. It's rare for Microsoft to lower such quotas for specific products, the people said.