Artificial intelligence is no longer a niche experiment in the tech world—it’s taking over.
According to Menlo Ventures’ 2025 The State of Generative AI in the Enterprise report, AI applications are now the fastest-growing category in software history.
Enterprise spending has skyrocketed, and the market is bigger—and more impactful—than many expected.
Enterprise AI Spending Hits Record Levels
In 2025, companies poured $37 billion into AI, a 3.2x jump from $11.5 billion the year before.
More than half of that investment—$19 billion—was funneled into AI applications specifically, while $18 billion went to infrastructure.
Today, AI applications account for over 6% of the entire software market.
And the numbers are staggering: at least 10 AI products now generate over $1 billion in annual recurring revenue (ARR), and 50 products exceed $100 million in ARR.
Where Enterprises Are Investing Their Dollars
The report breaks down the $19 billion spent on AI applications into three major categories:
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Tools for Specific Jobs ($7.3B): Coding leads the charge at $4 billion, with roughly half of all developers now using AI coding assistants daily. Other job-focused tools include IT operations ($700M), marketing ($660M), and customer support ($630M).
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Industry-Specific Solutions ($3.5B): Healthcare takes the largest slice at $1.5 billion, while tools for ambient documentation add another $600 million.
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General-Purpose AI Assistants ($8.4B): Copilots dominate, capturing $7.2 billion (86% of this category), while purpose-built agent platforms ($750M) and personal productivity tools ($450M) are still emerging.
From DIY to Full Adoption
The days of organizations experimenting with homegrown AI are fading.
The report shows 76% of enterprises now purchase AI solutions, compared to just 24% building them internally.
That’s a dramatic shift from 2024, when the split was closer to even at 47/53.
And once businesses commit to AI, results follow: 47% of AI deals reach production, compared to only 25% for traditional SaaS deals.
Startups Are Capturing the Market
Startups are reaping the rewards of this AI boom.
They accounted for 63% of enterprise application spending in 2025—a huge jump from 36% in 2024—showing that newer companies are dominating innovation in AI tools and services.
A Market on the Rise
With billions being spent, daily AI use in coding and other workflows, and startups leading the charge, the AI application market isn’t just growing—it’s redefining enterprise software.
As investment continues to pour in, it’s clear that generative AI has moved from curiosity to essential business infrastructure in record time.
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