IMAP Germany’s ARTIFICIAL INTELLIGENCE REPORT 2026

The “AI Special” outlines that accelerating AI capabilities are starting to structurally reshape the software industry and the way equity markets price software business models. The guiding question “Software eats the world and AI eats Software?” reflects the hypothesis that advanced foundation models can commoditize parts of traditional, rule-based SaaS, while simultaneously opening major opportunities for vendors that successfully embed AI into workflows and defend differentiation through proprietary data and domain expertise.

Why a structural valuation reset is underway

AI disruption is assessed not as a short-term hype cycle, but as a driver of structural repricing. Current market developments show that investors increasingly anticipate (i) margin compression, (ii) SaaS commoditization, and (iii) a migration of value towards AI-native platforms. The underlying reason is that AI can replace both traditional software logic (rule-based workflows, forms, and interfaces) and manual human tasks: two forces that jointly pressure incumbent monetization models. At the same time, faster innovation cycles and AI-driven feature rollouts intensify competition and shorten the durability of product differentiation. This dynamic can become particularly challenging for leveraged PE software portfolios if pricing power erodes and cost bases rise.

How the market interprets reactions to major AI milestones

The analysis compares the impact of key AI events on the broad NASDAQ 100 versus our software-focused IMAP index. In this assessment, early milestones such as ChatGPT’s broad release or Google’s Gemini launch had limited market impact because investors had not yet fully anticipated the disruption potential of advanced models.

More recently, a clear shift can be observed: breakthroughs started to initiate a fundamental repricing of technology and in particular software stocks. Two fundamental events over the last twelve months were DeepSeek and latest Anthropic Claude release. Markets interpreted DeepSeek not only as a model-side step change but also as a compute-side shock, moving both software and hardware equities. By contrast, the analysis indicates that the latest Anthropic Claude release primarily repriced software companies, with limited implications for computing demand and therefore less impact on hardware-heavy indices reinforcing the assessment that AI is perceived as direct functional substitution for SaaS.

Where impact is expected to be most significant: a subsector lens

Public software companies were segmented into core subsectors (including Sales & Marketing, ERP & SCM, Communication & Collaboration, HR, Vertical software, Data Analytics & BI, Engineering & Construction, and Security) and this framework is used to assess relative exposure. The central finding is that expected impact varies across different subsectors: workflow- and content-heavy categories appear more vulnerable to AI-driven substitution, while more complex and deeply embedded enterprise solutions represent higher switching costs, compliance requirements, and domain complexity.

The Report further highlights that repricing reactions around recent AI events show particularly strong moves in areas we consider closer to the automation frontier (notably Sales & Marketing, ERP/SCM, Communication & Collaboration, and HR). Overall, the revaluation is interpreted as investors expecting advanced models and agents to absorb features that previously justified stand-alone SaaS categories.

Our qualitative risk logic: “AI augments” vs “AI replaces”

Beyond market moves, we propose a practical way to think about disruption: whether AI primarily augments incumbents inside existing systems or replaces stand-alone tools through agentic workflows. Several areas are assessed as facing lower relative risks because AI may strengthen their relevance or reinforce incumbent advantages:

• Security: AI is expected to increase the attack surface and hence support demand for detection and response solutions.
• ERP / core systems: AI is assessed as augmenting planning, forecasting, and anomaly detection while the underlying system-of-record remains sticky due to deep process embedding and switching costs.
• Vertical software: Proprietary datasets, strong customer relationships and domain expertise can become the primary moat and measurably improvements in vertical workflows through AI should have a positive impact on pricing power.

The Report identifies areas of higher disruption risk where AI agents can execute end-to-end tasks and collapse fragmented tool landscapes:

• Communication & collaboration: AI agents are expected to take over meetings, task tracking, and coordination, shifting work from human-to-human to human-to-agent interaction or even agent-to-agent interaction and potentially consolidating tools into AI work hubs.
• HR: Strong automation potential across recruiting, screening, onboarding, and HR support; compliance-heavy cores may remain, but surrounding workflows can shift toward AI powered solutions.
• Sales & marketing: AI agents are expected to replace large parts of campaign creation, lead qualification, and content generation, with stand-alone tools likely being absorbed into platforms or replaced by AI-driven features.

For Data Analytics & BI, there is a more mixed outlook: traditional BI interfaces to commoditize, while semantic layers and data platforms become more central, and embedded analytics pressure stand-alone visualization tools.

IMAP Germany’s recommendation for mid-sized software companies

We see the following points for mid-sized vendors to stay competitive in the AI era:

1. Build a clear AI roadmap to mitigate strategic risk
   We recommend a structured assessment of which product areas are exposed to disruption by foundation models, scenario planning (“AI replaces,” “AI augments,” “AI differentiates”)
2. Protect revenue and margins against pricing pressure
   We advocate value-based pricing for AI-enhanced capabilities. Furthermore, we expect a structural change in the way profit and loss statements from software companies will look like in the coming years. We expect less personnel costs due to higher productivity through AI but also expect lower gross margins due to computing and human-in-the-loop costs.
3. Strengthen differentiation through targeted AI integration
   We recommend prioritizing AI features that deliver tangible, repeatable customer value (automation, insights, decision support) and treating AI as part of the core value proposition. Proprietary data, a sticky customer base and deep domain expertise are strong arguments for mid-sized software companies to take advantage of the new era of AI.

In our view, mid-sized software companies that proactively embrace AI, reinforce differentiation, and evolve business models can withstand disruption and turn AI into a catalyst for reinvention and long-term competitive advantage.