Growing AI spend challenges firms as ROI confidence lags

CloudZero has released a report examining spending trends and challenges related to artificial intelligence (AI) within software-driven organisations.

The report, titled "The State Of AI Costs," is based on a survey of more than 500 software professionals in managerial roles or higher. Its findings indicate that AI expenditure is rising sharply, with average monthly budgets for AI projected to increase by 36% in 2025. This points to a shift towards larger and more complex AI initiatives within organisations.

Despite this growing investment, only 51% of respondents reported having confidence in their ability to evaluate the return on investment (ROI) of AI costs. The report attributes this uncertainty to a range of factors, including the difficulty of isolating the impact of AI from other simultaneous business investments.

According to the survey results, organisations are allocating resources to AI initiatives to make software development more efficient, enhance cybersecurity and compliance, and drive innovation and competitive advantage. However, the absence of robust cost governance remains a concern. The report states that ineffective governance could render even promising AI projects financially unsustainable.

The research identified automation, scalability, and cloud deployment as primary uses for AI tools, with most organisations focusing on applications designed to support these areas. However, the report raises concerns about profitability, noting that without appropriate mechanisms for cost tracking, it is difficult to determine whether AI initiatives are truly delivering value.

Recruitment emerged as one of the main challenges organisations face as they expand their AI activities. The report found that high salary expectations, limited availability of qualified candidates, and a lack of internal expertise are the top barriers to hiring. The skills most in demand for AI development include cloud computing and data engineering, according to the surveyed professionals.

The report also links improved confidence in calculating AI ROI to the use of third-party cost optimisation tools. Organisations using these tools reported that increased visibility into their spending was a key benefit, providing greater clarity into the true impact of AI investments.

Erik Peterson, Founder and Chief Technology Officer at CloudZero, commented on the findings: "AI spend is going through the same hype cycle we've seen with every transformational tech shift: lots of bets, not a lot of clarity. What's different this time is the scale and speed of that spend. The companies that can tie AI usage to business outcomes aren't the ones flinching. They're doubling down. Like the cloud, AI will become just another part of how every modern business runs. When that happens, it's not going to be the biggest companies that win, it's going to be the ones with the best AI unit economics — the ones that know how to scale profitably."

The report underscores the need for organisations to establish effective cost governance and robust monitoring systems as they continue to increase AI investment. It highlights the growing importance of aligning AI strategies with clear business objectives and measurable outcomes, particularly at a time when demand for skilled AI professionals is outpacing supply.