Gartner Says AI Layoffs Miss Returns as Agent Software Spending Jumps to $206.5 Billion
Updated
Updated · The Economic Times · May 19
Gartner Says AI Layoffs Miss Returns as Agent Software Spending Jumps to $206.5 Billion
7 articles · Updated · The Economic Times · May 19
Gartner said cutting staff to fund AI may free budget but does not generate real returns, urging companies to invest in skills, roles and operating models that let workers guide autonomous systems.
Its forecast shows why the pressure is rising: spending on AI agent software is projected to climb to $206.5 billion in 2026 from $86.4 billion in 2025, then reach $376.3 billion in 2027.
Gartner argues autonomous business will create more human work over time and become a net-positive job creator by 2028-2029, driven by tasks AI cannot absorb and by demographic and trust-related constraints.
Stanford Digital Economy Lab reached a similar conclusion, saying companies hit a productivity J-curve because AI adoption requires costly workflow redesign, retraining and governance before profits improve.
Federal Reserve research also found no overall drop in job postings at high-AI-adoption firms, with hiring shifting away from routine roles toward strategy, oversight and human-centered problem solving.
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From $2.5 Trillion AI Spend to Regret and Rehiring: The Real Impact of Enterprise AI (2025-2029)
Overview
Between 2025 and 2027, companies rapidly increased spending on agentic AI software, expecting big returns and greater efficiency by replacing staff with AI. However, many organizations faced disappointing results, as the technology did not deliver the promised improvements. This led to a trend called 'AI washing,' where AI’s abilities were overstated and firms made risky decisions based on hype. By early 2026, more than half of these companies regretted their aggressive layoffs, realizing that cutting human roles did not bring the expected financial benefits and that AI could not fully replace human expertise.