MENLO PARK, Calif., Dec. 09, 2025 (GLOBE NEWSWIRE) — Menlo Ventures, a leading venture capital firm investing at the forefront of artificial intelligence, today released its 2025 The State of Generative AI in the Enterprise report. The benchmark study, now in its third year and one of the most cited sources on enterprise AI adoption, draws on a survey of nearly 500 U.S. enterprise decision-makers to track how companies are actually deploying and investing in AI.
The release comes amid renewed scrutiny of the AI market, sparked by an MIT study published earlier this year claiming that 95% of AI initiatives fail. Menlo Ventures’ data tells a different story: broad production deployments are driving real revenue traction as industry adoption accelerates.
“Enterprise AI investment tripled in a single year, from $11.5 billion to $37 billion. To put that in perspective, the fastest enterprise category expansion in history is unfolding now. Every major company is racing to integrate AI because the productivity gains are undeniable, and the competitive risk of falling behind is existential,” said Tim Tully, Partner at Menlo Ventures.
Applications captured more than half of all enterprise AI investment this year ($19 billion). In just three years since ChatGPT debuted, AI applications now represent 6% of the entire software market, the fastest growth rate in software history. Enterprise investment concentrates in three categories: coding and developer tools ($7.3B, where half of developers now use AI daily), industry-specific AI solutions ($3.5B, led by healthcare), and general-purpose copilots ($8.4B). At least 10 AI products now generate $1B+ in ARR, and 50+ have crossed $100M.
Enterprise Spend and Adoption Trends
After three years of AI adoption, clear patterns have emerged that break sharply from the traditional SaaS model that defined decades of software transformation and value creation.
- Build vs. Buy: 76% of AI solutions are now purchased vs. built internally, flipping from near-parity just 18 months ago. Despite continued strong investments in internal builds, ready-made AI solutions are reaching production more quickly while enterprise tech stacks continue to mature.
- Bottom-Up Adoption Accelerated: Product-led growth now drives 27% of AI spend—4x traditional software rates—with shadow AI pushing the real figure closer to 40%. Cursor scaled to $200M in revenue before hiring a single enterprise sales rep.
- Enterprises Commit Faster: 47% of AI deals reach production—nearly twice the conversion rate of traditional SaaS. Buyers move faster because AI delivers clear, immediate value that short-circuits standard procurement cycles.
- Startups Outpace Incumbents: Startups captured 63% of the AI application market, earning nearly $2 for every $1 earned by incumbents. Categories like coding (71% startup share), sales (78%), and finance/operations (91%) are being reshaped by AI-native challengers moving faster than legacy platforms.
“AI is fundamentally rewiring how enterprises buy software,” said Joff Redfern, Partner at Menlo Ventures. “Product-led growth now commands nearly a third of all AI software spend, deals close at twice the speed of traditional SaaS, and startups are capturing two dollars for every one incumbents earn. AI applications are now the fastest-growing software category on record. It’s an entirely new landscape: faster, flatter, and far more competitive.”
AI Infrastructure and Market Consolidation
Enterprises spent $18 billion on infrastructure—foundation models, training, and tooling—driving rapid consolidation and shifts in market leadership.
- Anthropic Extends its Lead: Anthropic now commands 40% of the enterprise LLM API market share, more than triple its 12% share in 2023, driven by its dominant performance in coding. OpenAI‘s share fell to 27%, losing nearly half of its market since 2023 (50%), while Google climbed to 21% (a 3x increase from 7% in 2023). Together, these three leaders account for 88% of enterprise model usage.
- Open-Source Adoption Slows: Enterprise adoption of open-source LLMs fell nearly 50%, from 19% to 11%, with organizations remaining cautious toward Chinese models despite rapid performance gains. DeepSeek’s usage has leveled off after an early spike following its R1 release. Outside the enterprise, developers are less conservative, building with Qwen and DeepSeek, drawn by competitive benchmarks and lower costs.
- Despite the Hype, AI Agents Are Still Early: Only 16% of enterprise deployments qualify as true agents—most are fixed-sequence workflows. Incumbents like Databricks,* Snowflake, and MongoDB lead infrastructure (56% share combined), suggesting enterprises prefer to build on trusted platforms while AI-native startups compete on inference performance.
“Anthropic is sweeping the enterprise. In the two years we’ve tracked this space, they’ve tripled their market share and at 40%, they could soon own half the enterprise LLM API market. During that same period, OpenAI ceded nearly half its share. Now that they’ve fallen to 27%, Google is nipping at their heels with 21%,” said Deedy Das, Partner at Menlo Ventures. “The era of automatic OpenAI wins is over, and it may be hard for anyone to catch Anthropic. They’ve dominated coding for 18 months straight—a $4 billion category that’s become the gateway to enterprise workflows across every department and industry. And from what we’ve seen, once an enterprise chooses a vendor, they tend to stay. Even when switching costs are low, most just upgrade to the latest model from their preferred provider.”
For the complete 2025 State of Generative AI in the Enterprise report, including detailed methodology, visit: https://menlovc.com/perspective/2025-the-state-of-generative-ai-in-the-enterprise/.
About Menlo Ventures
Menlo Ventures is a leading early-stage venture capital firm investing at the forefront of AI. Our portfolio includes more than 85 public companies and over 170 exits through mergers and acquisitions. Currently managing more than $7 billion in assets, we invest at every stage across consumer, enterprise, and healthcare. Our portfolio companies include Abnormal AI, Anthropic, Benchling, Carta, Chime, Harness, Poshmark, Recursion, Roku, Siri, Neon, and Uber. We strive to have a positive impact on everything we do. When we’re in, we’re ALL IN, and we are ALL IN on AI.
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Media Contact
For more information or to schedule an interview with one of the report authors, Tim Tully, Joff Redfern, Deedy Das, and Derek Xiao, please contact [email protected].
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