May 02

Yes, Many Software Leaders Have Moats. No, That’s Not Enough.

General News

▤ Summary

Moats in B2B software still retain customers (high GRR) but no longer guarantee growth because AI-driven budget shifts favor vendors capturing new AI spend. Public and private market signals show a large valuation gap between AI-native winners and incumbent software utilities, and most incumbents report AI revenue as a tiny share of ARR. The critical growth metric is net new customer acquisition, not retention, because seat compression, outcome-based pricing, and slower expansion are eroding revenue even without churn. The piece recommends watching net new logos, AI-specific ARR, the GRR/NRR gap, CAC trends, and pipeline composition as leading indicators of who will win in the AI era.