Enterprise technology spending improved during the second quarter of 2026, but the benefits of artificial intelligence are not being distributed evenly across the software industry.
Ahead of the upcoming software earnings season, Citi identified Palantir Technologies, Microsoft and Figma as notable companies positioned to benefit from AI deployment. The bank’s view reflects a broader shift in investor attention: markets are moving beyond enthusiasm about generative AI and asking which software providers can convert adoption into measurable revenue, stronger customer retention and higher operating profit.
That distinction matters because AI presents both an opportunity and a potential threat to traditional software business models. Companies that provide essential data infrastructure, cloud capacity or deeply embedded workflows may gain market share. Others could face pricing pressure if generative AI reduces the value of individual software seats or allows customers to complete tasks with fewer employees.
For investors, the Q2 earnings cycle will therefore be less about whether companies mention AI and more about whether they can prove that AI is improving their financial performance.
Citi Sees Improving IT Spending but Remains Selective
Citi’s software outlook indicates that enterprise IT spending strengthened during the second quarter. A healthier spending environment could support cloud platforms, data-management providers and software companies offering tools that help businesses deploy AI applications.
Other industry research has pointed in a similar direction. A Jefferies survey suggested that cloud spending growth could accelerate modestly during 2026, with Microsoft and Amazon standing out among the leading providers. Survey respondents reportedly showed a growing preference for Microsoft Azure, reinforcing the view that Microsoft could capture a significant share of enterprise AI infrastructure spending.
However, increased technology budgets do not guarantee strong results across the entire software sector. Companies must demonstrate that their products remain essential as generative AI changes how employees design, analyze data, write code and manage business processes.
Citi’s favored names represent three different approaches to AI monetization. Palantir sells an AI-focused data and decision platform. Microsoft combines cloud infrastructure with enterprise software distribution. Figma is integrating AI into a collaborative design workflow that already serves a large professional user base.
Palantir Offers Direct Exposure to Enterprise AI Adoption
Palantir is arguably the most direct AI software beneficiary among the three companies.
Its Artificial Intelligence Platform, or AIP, helps organizations connect large language models with proprietary data, operational systems and decision-making processes. This allows customers to use AI within controlled enterprise environments rather than relying solely on public chatbots or isolated productivity tools.
The company entered its next earnings period with significant momentum. Palantir reported first-quarter 2026 revenue growth of 85% year over year, while U.S. revenue increased 104%. Management subsequently forecast second-quarter revenue between $1.797 billion and $1.801 billion and adjusted operating income between $1.063 billion and $1.067 billion.
For investors, the main question is whether Palantir can maintain exceptional growth across both its government and commercial businesses. Its U.S. commercial segment is particularly important because it indicates whether AIP is gaining adoption among companies outside Palantir’s established defense and intelligence customer base.
Investors should monitor customer growth, remaining deal value and the size of new contracts. Remaining deal value represents revenue associated with signed agreements that has not yet been recognized. Continued expansion would suggest that current AI interest is developing into long-term commitments.
Palantir’s valuation remains a major risk. Rapid revenue growth and strong margins have already encouraged investors to assign the company a substantial premium compared with many traditional software stocks. As a result, even strong earnings may not support PLTR stock if guidance falls below elevated market expectations.
Microsoft Combines AI Infrastructure and Distribution
Microsoft’s AI opportunity is broader than Palantir’s because the company participates across cloud computing, productivity software, cybersecurity, data analytics and developer tools.
Azure provides computing infrastructure for training and running AI models, while Microsoft 365 Copilot brings generative AI into applications such as Word, Excel, Outlook and Teams. GitHub Copilot targets software developers, and the company’s broader Copilot strategy allows it to introduce AI services across an enormous existing customer base.
This distribution advantage could be one of Microsoft’s most valuable assets. Enterprise customers already use Microsoft identity, security, collaboration and database products, reducing the difficulty of adopting additional AI features from the same provider.
Cloud-spending surveys suggest Microsoft is maintaining strong momentum. Jefferies reported that chief information officers increasingly favored Azure as a primary cloud provider and viewed Microsoft as one of the leading beneficiaries of AI-related cloud demand.
The key issue for Microsoft earnings will be whether AI demand is translating into faster Azure growth and meaningful Copilot revenue. Investors will also examine whether infrastructure supply constraints are limiting growth.
Microsoft has committed substantial capital to data centers, chips and networking equipment. That spending supports long-term capacity, but it also increases depreciation and creates pressure to demonstrate an attractive return on investment. Strong cloud growth and improving AI utilization would help justify the company’s infrastructure expansion.
Management commentary on demand, capacity and Copilot adoption may therefore matter more than a modest earnings-per-share beat.
Figma Could Turn AI Disruption Into a Growth Opportunity
Figma occupies a different position in the AI software market.
The company provides collaborative design tools used by product designers, software developers and business teams. Generative AI could threaten parts of the design-software industry by allowing users to create layouts, prototypes and visual assets through natural-language instructions.
Citi nevertheless sees an opportunity for Figma to become a central workflow platform rather than being displaced by AI. The firm initiated coverage with a Buy rating and a $36 price target, arguing that Figma had captured only about 4% of a potential $25 billion addressable market. Citi also expects that market opportunity to expand significantly as AI becomes more integrated with product development and design workflows.
Figma’s recent operating performance supports part of that argument. The company reported first-quarter revenue of $333.4 million, up 46% year over year, and raised its full-year 2026 revenue outlook to between $1.422 billion and $1.428 billion. Paid customer growth and adoption of AI-enabled features also contributed to the stronger outlook.
The next test will be whether Figma can monetize AI without weakening its seat-based subscription model. AI tools may allow smaller teams to complete more work, potentially reducing the number of paid users required by some customers.
Figma must therefore show that AI increases the platform’s value enough to support higher spending, broader adoption or new product categories. Growth in large enterprise customers, paid seats and usage of AI features will be important indicators.
Data Infrastructure Could Be Another Major Winner
The broader Citi outlook also highlights the importance of data infrastructure and AI enablement.
Enterprise AI systems require access to accurate, governed and frequently updated information. This creates demand for databases, cloud platforms, data warehouses and tools that help companies connect models with proprietary business information.
MongoDB and Snowflake are among the software companies commonly associated with this layer of the AI market. Their earnings commentary could reveal whether businesses are moving AI projects from experimentation into production.
Production deployment is particularly important because pilot projects often generate limited software revenue. Large-scale implementation requires more database capacity, computing resources, cybersecurity and monitoring, potentially creating a more durable revenue opportunity.
Investors should watch consumption trends, new customer additions and remaining performance obligations across data-platform companies. These indicators can help determine whether enterprise AI investment is accelerating or remaining concentrated among a small number of large technology customers.
What Investors Should Watch During Q2 Earnings
The most important theme during software earnings will be proof of AI monetization.
For Palantir, that means maintaining rapid commercial and government growth while converting customer interest into large contracts. For Microsoft, it means demonstrating that Azure and Copilot revenue can justify aggressive infrastructure spending. For Figma, it means proving that AI strengthens its design platform rather than undermining its subscription model.
Guidance will be equally important. Software stocks often trade on expected future revenue rather than current earnings alone. Companies may exceed quarterly estimates but still see their shares fall if management provides cautious forecasts.
Investors should also distinguish between genuine AI revenue and general product growth described using AI terminology. Useful indicators include contract expansion, higher cloud consumption, increased revenue per customer and clear evidence that new features are generating paid adoption.
Citi’s selective approach reflects the growing maturity of the AI investment cycle. The market is no longer rewarding every company with an AI narrative. It increasingly favors businesses with proprietary data, established distribution, essential workflows and a credible path to profitable growth.
FAQ
Which AI software stocks does Citi favor?
Citi has highlighted Palantir, Microsoft and Figma as notable potential beneficiaries of enterprise AI deployment ahead of the Q2 2026 software earnings season.
Why is Palantir considered an AI beneficiary?
Palantir’s Artificial Intelligence Platform connects AI models with corporate and government data, helping customers deploy AI in operational environments. The company also entered Q2 with rapid revenue growth and strong guidance.
How does Microsoft make money from AI?
Microsoft can monetize AI through Azure cloud consumption, Microsoft 365 Copilot subscriptions, GitHub Copilot, security products and other enterprise services.
Why could AI benefit Figma?
AI could make Figma’s collaborative design platform more useful by accelerating prototyping, content creation and product-development workflows. The risk is that automation could reduce demand for traditional software seats.
What is the biggest risk for AI software stocks?
The main risks include elevated valuations, slower enterprise adoption, heavy infrastructure costs, competition and uncertainty over whether AI features can generate sustainable incremental revenue.
Disclaimer: This article is for informational purposes only and does not constitute financial advice. Always conduct your own research before making any investment decisions.
