On Thursday evening several software companies reported results, and investors' reaction painted an interesting picture. Israeli-founded JFrog beat estimates, raised its full-year outlook, and the stock jumped about 22%. Atlassian, the company behind Jira and Confluence, also beat estimates, but its stock fell about 16% on a cautious outlook. Two software companies, two good results, two opposite reactions. Why?
The answer lies in the question every software investor asks today: does AI grow your market, or threaten to replace it? JFrog sells a platform for managing and securing the 'parts' software is built from: code libraries, files, containers and, over the past year, AI models. When AI agents write more code, there are more parts to manage and secure. Every jump in AI use increases demand for its product. It shows in the numbers: JFrog's cloud revenue grew 60%.
Atlassian is in a more complicated spot. Its tools help teams manage tasks, document and coordinate work, and it charges per user. If AI agents do some of the work, companies may need fewer employees and therefore fewer seats. AI tools might also handle some tasks that today require a management system. Atlassian is building its own AI tools and remains a large, profitable company, but investors are pricing the risk.
It is a pattern across software this year. Companies selling infrastructure to the AI world, such as Cloudflare, which also jumped that evening, benefit. Companies whose revenue model is based on 'seats', the number of employees using the product, are under pressure. Israel shows it too: monday.com, which also charges per user, cut about 20% of its workforce this year as part of a shift to AI, and Fiverr is losing buyers to AI tools.
The takeaway for anyone following Israeli tech: the important question is no longer 'does the company use AI', because they all do. It is where the company sits in the chain. Those selling the tools, infrastructure or security AI needs come out ahead. Those selling work AI can do need to reinvent themselves, fast.
