The Sword of Damocles in Software

GitHub Copilot pioneered AI coding assistance. First to market. 20 million users. Then Claude Code & OpenAI Codex launched in mid-2025. Within six months, Copilot’s daily installs peaked & declined while competitors surged past 100,000 combined.¹

The sword didn’t fall on a laggard. It cut the early leader. If Microsoft can lose share in six months, no one is safe.

I analyzed 374 quarterly NDR observations from 25 public software companies. For years, the decline looked gradual. Net dollar retention fell from 125% in 2022 to 112% in 2025. Quarter by quarter. No cliff when ChatGPT launched. No acceleration when enterprises adopted Copilot.

Then came 2026.

The 25th percentile fell from 106% to 101% in a single quarter, now touching the breakeven line.² The weakest companies are bleeding first. Zoom sits at 98%. Asana at 96%. The bottom quartile is now contracting.

The companies in the bottom quartile face different threats, but they share one trait : products simple enough to replace. Bill.com (94% NDR) serves SMBs depressed by macro conditions.³ Zoom (98%) faces near-free alternatives in Teams & Google Meet. Asana (96%) offers task workflows that competitors & AI agents can replicate. With 96% NDR, they lose 4% of existing revenue annually. Growing 9% requires 13%+ new customer acquisition just to tread water.⁴

Macro pressure. Commoditization. Competition. AI. Each blade cuts differently. The bottom quartile will see accelerating losses. Some may tip into outright contraction. The sword of Damocles hangs by a single horsehair. For simpler products in competitive categories, that horsehair is fraying.