Two Software Companies Just Proved AI Doomsayers Wrong

34% and 14%. Those were Friday's stock gains for RingCentral and Five9, respectively—a stunning reversal in a sector that's been hemorrhaging value for weeks.

The Great Software Selloff

This year has been brutal for software stocks. The sector has plunged 23%, with companies like Atlassian, Unity Software, and Rapid7 losing more than half their value. Even giants like Salesforce and Microsoft have dropped 30% and 18%.

The culprit? AI panic. Tools from Anthropic and OpenAI can now build apps and websites in minutes, sparking fears that traditional software-as-a-service companies are about to become obsolete.

When AI Becomes Your Friend

But RingCentral and Five9 told a different story. Both customer service software firms reported that AI adoption has actually accelerated their growth, not hindered it.

RingCentral saw its annual recurring revenue from AI-using customers double year-over-year to nearly 10% of total revenue. The company recently integrated ChatGPT models into its voice AI products, turning potential disruption into competitive advantage.

Five9 delivered even more impressive numbers. Enterprise AI bookings more than doubled, pushing the company's AI portfolio past $100 million in annual recurring revenue.

The Moat That Matters

Five9's Chairman Michael Burkland offered perhaps the most insightful comment during Thursday's earnings call: "You cannot run a customer service organization on an LLM alone."

That's the key insight investors have been missing. While large language models are powerful, they're tools—not complete solutions. The companies that understand how to integrate AI into comprehensive platforms, backed by domain expertise and customer relationships, aren't being displaced. They're being enhanced.

The Survival Blueprint

What separates winners from losers in the AI era? It's not about avoiding AI—it's about embracing it strategically. RingCentral and Five9 didn't just add AI features; they used AI to solve real customer problems more effectively than pure-play AI tools could.

This matters for investors evaluating software stocks. The question isn't whether a company uses AI, but how well it integrates AI into its existing value proposition.

Beyond the Hype Cycle

The market's AI panic may be overdone. Yes, some software companies will struggle to adapt. But Friday's earnings suggest that well-positioned firms can turn AI from existential threat into growth catalyst.

For the $2.8 trillion software industry, that's a $640 billion difference between panic selling and strategic buying.