AI software is making money
Not just hardware are profiting from AI
The five US tech giants, Alphabet, Amazon, Apple, Meta, and Microsoft, recently released their second-quarter 2025 financial reports. One of the most significant revelations was that “AI software is starting to make money.”
This has two key implications: First, ordinary people are already using AI in their daily lives and work; otherwise, software companies wouldn’t be able to profit from it. More importantly, hardware industries, such as semiconductors, data center equipment, network communications, servers, and even energy generation, are no longer the only ones poised to profit from the AI boom.
Representative Listed Software Companies
As of the second quarter of 2025, there are two main categories of companies that have clearly demonstrated that their primary revenue comes from software and that they are capable of generating significant profits from AI software. The first category consists of the five major tech stocks: Meta, Microsoft, and Alphabet. As of August 4, 2025, the second-quarter 2025 financial reports of the five largest tech stocks have been released, offering insights into the operating performance and reasons behind the performance of three of the largest companies making significant profits from AI software, as well as the underperformance of two other tech giants.
Other notable companies include Reddit, Palantir Technologies, Figma, and Oracle.
The financial performance of Meta and Reddit was particularly impressive for investors.
Private Software Companies
OpenAI and Perplexity, two of the most widely used AI startups, along with Anthropic, all showed significant growth in revenue, user base, and enterprise subscriptions.
For more information about OpenAI, please refer to my post of “OpenAI, the Generative Artificial Intelligence rising star and ChatGPT“
Q2 2025 result of companies making money from AI software
Five Tech Titants
According to their financial reports, the five largest tech companies’ average earnings per share (EPS) exceeded market expectations by 14%, and their revenue also exceeded expectations by an average of 4%. Among them, Meta performed the best, with revenue increasing by 22% year-over-year and earnings per share increasing by 38%. Its advertising business exceeded market expectations, leading to a 11.3% surge in its stock price following the release of its earnings report.
Meta
The AI capabilities Meta has infused into its advertising technology stack and content recommendation engine are yielding tangible results. Meta is building an AI “personal superintelligence” system that is expected to reshape its social and advertising ecosystem. Its AI recommendation model has significantly improved ad conversion rates and user engagement, directly contributing to its revenue and making Wall Street more accepting of its massive spending. Meta’s core advantage lies in the direct value it generates for its advertising business, further strengthening Wall Street’s acceptance of its $72 billion annual capital expenditure plan.
Microsoft
Microsoft also delivered strong results in its latest quarterly earnings report. Following the release of its second-quarter earnings, Microsoft’s stock price rose 4%, pushing its market capitalization above $4 trillion, making it the second company, after chip giant Nvidia, to reach this milestone.
Its financial report demonstrated impressive top-down strength, with gross and operating margins holding up despite a significant increase in capital expenditures. Microsoft also announced a record $30 billion in capital expenditures for the third quarter, following sales and forecasts for its Azure cloud computing business exceeding expectations, demonstrating the returns from its massive AI investments. Furthermore, Microsoft disclosed for the first time that Azure annual sales exceeded $75 billion, and the number of users of its Copilot AI tool surpassed 100 million.
Analysts noted that the rapid demand for AI is driving Azure’s growth alongside high-margin products like Office and Windows, becoming a key driver of Microsoft’s profit structure.
Alphabet
Alphabet’s strong second-quarter results demonstrate that the company achieved growth above expectations while significantly increasing investment.
Alphabet also announced an increase in its 2025 capital expenditure forecast from $75 billion to $85 billion, marking the highest annual spending percentage since 2006 (reaching 22% of expected annual revenue).
Despite market concerns that its AI-powered search summary feature, “AI Overviews,” might undermine the value of advertising, user engagement actually increased by 10% during the period, with no negative impact on revenue, demonstrating that Alphabet’s massive investment is beginning to bear fruit.
As companies like Alphabet and Meta race to deliver on their AI promises, maintaining strong core businesses, despite staggering capital expenditures, will buy them more time to prove to investors that the billions of dollars spent on infrastructure, talent, and other technology-related expenses are worthwhile.
Amazon
Despite Amazon’s $118 billion in annual capital expenditures, AWS cloud service growth momentum is weak, with only 18% year-over-year growth in Q2, far behind Microsoft Azure (34%) and Google Cloud (32%), sparking strong investor skepticism.
Amazon’s stock price plummeted 8.27% after the earnings report was released. The CEO defended AWS during the earnings call, highlighting the 30% to 40% cost advantage of its in-house AI chip, Trainium2. He also launched a portfolio of AI products, including Alexa, Kiro, and robotic assistants, hoping to convince the market that AWS remains competitive in the long term in AI. Amazon still needs to demonstrate the effectiveness of its AI strategy with more concrete revenue and user data.
However, Amazon’s advertising division was a bright spot, with second-quarter revenue increasing 23% year-over-year. This significant growth in Amazon’s advertising division, undoubtedly driven by AI, further demonstrates the importance of AI software in business growth, especially for a massive enterprise like Amazon, where significant growth is inherently challenging.
Apple
Apple reported its strongest quarterly earnings in three years, with revenue increasing nearly 10% year-over-year. iPhone sales grew 13%, Mac sales increased 15%, and its high-margin services business also saw a 13% increase. This was Apple’s best earnings report since 2021.
Investor sentiment that Apple’s AI capabilities lag behind competitors has shifted from perception to reality. A major upgrade integrating AI into Siri has been delayed for two years, leading to a nearly 20% drop in shares since 2025. Investors have penalized Apple’s stock price, punishing it so much that even after a rare 10% revenue growth in the second quarter, it still fell 2.5% the following day.
CEO Tim Cook announced during the earnings call that Apple would “significantly increase AI investment,” but Apple’s actual capital expenditures remain far below those of its competitors. Internal research teams are demoralized by limited access to data and difficulties in training models, leading to significant development delays. Rumors circulate that Meta is poaching disgruntled Apple employees with high salaries. Industry analysts have even stated that if Apple cannot accelerate its development, acquiring AI startup Perplexity may be its only option. Perplexity is valued at approximately $14 billion. If Apple completes the transaction at the rumored $40 billion price tag, it would surpass its previous record for largest acquisition (the $3 billion acquisition of Beats in 2014).
Other Public Software Companies
Reddit’s strong second-quarter earnings report sent its stock price soaring 17.5% the day after the release. Reddit’s revenue growth was primarily driven by its growing advertising business. Since its IPO in March 2024, the company has been investing heavily in ad technology, aiming to expand its share of the digital advertising market and challenge the leading position of giants like Meta and Google.
Beyond advertising, Reddit’s extensive database of user posts has become a valuable resource for tech companies to train AI models. Reddit has signed data licensing agreements with OpenAI and Google and is exploring additional partnerships. Reddit Answers, the company’s AI-powered tool launched in December, has grown to 6 million weekly users from 1 million in the previous quarter.
For more information about Reddit, please see my post of “Reddit first profitability sent stock rally 2.5 folds“
Figma
The largest US IPO since 2025, software stock Figma, unusually profitable at its IPO and riding the AI wave, saw its stock price surge 240% on its first day of trading. Figma’s prospectus mentioned AI over a hundred times.
Adobe, the company’s initial acquisition target, was initially skeptical of the company’s future prospects due to the impact of AI on its core products. Adobe’s own AI integration efforts were also lackluster, leading the company to be seen as a prime example of software companies severely impacted by AI. Its stock price has plummeted 40% in two years, no longer commanding the 70-plus P/E ratio it once enjoyed.
Regarding Figma, please refer to my post of: “Why Adobe’s Figma Acquisition Caused Upheaval“
Palantir
Palantir Technologies’ second-quarter revenue surpassed $1 billion for the first time, surging 48% year-over-year. Adjusted earnings per share reached $0.16, both exceeding market expectations. The company also raised its full-year 2025 revenue forecast. Its stock price surged 7.85% the day after the earnings report was released.
Palantir’s stock price has risen by more than 620% over the past year and more than 130% this year, bringing its market capitalization to over $409 billion, making it the 23rd largest publicly traded company in the world. Palantir is one of the few large software companies that relies entirely on AI software for its revenue, and is arguably the best example of the current benefits of AI software.
For more information about Palantir, please refer to my posts of “The value of Palantir, pros and cons of Palantir investment” and “What kind of company is Palantir?“
Oracle
For nearly two decades, Oracle’s stock price has lagged behind its peers. However, thanks to its partnership with the US Stargate project, it has become the fourth-largest AI cloud provider.
For more information about Palantir, please refer to my posts of “Oracle’s cloud computing and AI finally recognized” and “How does database monopoly Oracle make money? What are the prospects?“
SoundHound
SoundHound’s second-quarter results showed growth across all business segments, its strongest quarter ever. Revenue soared 217% to $42.68 million, while losses per share were $0.03, exceeding expectations. The company raised its full-year revenue guidance to a range of $160 million to $178 million.
Its stock price surged 17.73% the following day. The company achieved significant new progress with a major contract win in China. The voice assistant will be integrated into a major automaker’s products for sale in China and globally, including development of multiple new languages.
For more information on SoundHound, please see my other post: “Deep Dive on SoundHound, the top AI Voice expert“
MongoDB
MongoDB’s second-quarter revenue grew 24% year-over-year to $591 million, far exceeding analysts’ average estimate of $556 million. Its profit levels and full-year profit and revenue guidance also exceeded market expectations. In its earnings report, MongoDB stated that it has added over 5,000 new customers so far this year, “setting a record for new customers added in the first half of the year.”
MongoDB’s stock price surged 44% in the week following the release of its second-quarter earnings report.
For MongoDB, please see my post of “How does the cloud-native file database MongoDB make money?“
Pure Storage
Pure Storage exceeded second-quarter earnings expectations and raised its full-year guidance. However, investors were most excited about the initial returns from Pure’s recent contract with Meta, which will help the social media giant efficiently manage its massive data storage needs while meeting its artificial intelligence needs.
Pure Storage’s stock price soared 33% in the week following the release of its second-quarter earnings report, marking the company’s second-largest weekly gain in history.
Snowflake
Snowflake’s stock price rose 20% after its AI data cloud service beat earnings and revenue expectations. The company also raised its full-year product revenue guidance and revealed that over 6,100 customers are now using Snowflake AI, up from 5,200 in the previous quarter.
Snowflake’s stock price rose 21% in the week following the release of its second-quarter earnings report.
For Snowflake, please see my post of “What company is Snowflake owned by Buffett? Where is its value?” and “Deep dive on Snowflake’s competitiveness“
Autodesk
Autodesk’s CEO, during the company’s second-quarter earnings call, highlighted Autodesk’s ability to help customers streamline cross-product workflows and promoted the Autodesk Assistant, a tool that improves user productivity through simple instructions.
He also addressed a core question: the existential threat posed by artificial intelligence. “AI may eat the software industry,” he said, “but it won’t eat Autodesk.”
Autodesk’s stock price also rose 8.4% in the week following the release of its second-quarter earnings report.
For Autodesk, please see my post of “How does Autodesk make money? Why is the stock price so amazing?“
I am the author of the original text, the essence of this story was originally featured on Smart Magazine, Issue of September 2025
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