Editor’s note: Today, Porter delivers part two of a three-part series on the implosion of Leopold Aschenbrenner’s Situational Awareness fund – and the key reason behind its failure that everyone seems to be missing… The final installment of this three-part series will appear in the next Journal, on Friday.

Also note this brief update to Monday’s essay, when we reported that Intuit (INTU) was a stock that Leopold Aschenbrenner’s Situational Awareness fund had shorted. Yesterday, Intuit reported fiscal Q4 results and guided fiscal 2027 non-GAAP earnings to $22.88–$23.12 per share against a Wall Street consensus of $27.31. Some people on Wall Street believe (like Leopold) that this is more evidence of the “death of software.” We disagree.

What actually happened is far more banal: effective August 1, Intuit stopped stripping out share-based compensation from these adjusted numbers. CFO Sandeep Aujla said the 2027 guidance carries a $5.81 impact from stock-based compensation expenses. Ergo, when you add $5.81 back, the guidance midpoint is $28.81 per share, 5% above the $27.31 estimate.

Here’s another way to look at it. Intuit’s GAAP accounting requires no reconstruction. Aujla guided fiscal 2027 GAAP earnings per share to $20.12-$20.36, (growth of 22%-24%) against a $19.94 consensus. Those are not the numbers of a dying business.

Fiscal 2026 revenue grew 14% to $21.4 billion. Non-GAAP operating margin expanded 1.5 points to 41.7%. Q4 adjusted earnings came in at $4.03 per share against a $3.58 estimate. Mid-market revenue grew 39% with customers up 28%, and Intuit Enterprise Suite – the accounting and payroll package sold to companies too large for QuickBooks Online – passed $145 million in annualized revenue, 4x the prior year.

Microsoft (MSFT) passed 30 million paid Copilot seats in the June quarter, up from 15 million in January. Tech wizards like Leo Aschenbrenner hate Copilot – Microsoft’s artificial intelligence (“AI”) assistant. Just like they hated Windows ’97. And everything else Microsoft has ever built.

So what?

Accenture alone bought 740,000 Copilot seats. Bayer, Johnson & Johnson, Mercedes-Benz, and Roche have each deployed more than 90,000. Microsoft’s commercial remaining performance obligation – contracted revenue not yet recognized, which is the closest thing software has to a railroad’s signed freight contracts – stands at $678 billion, up 84% year over year!

Annual recurring revenue for Adobe’s (ADBE) AI-first passed $500 million in the quarter ended May 2026 and tripled year over year. Salesforce’s (CRM) Agentforce went from $800 million of annual recurring revenue in the January quarter to $1.2 billion by April, up 205%. Veeva Systems (VEEV) is giving its AI agents away free inside Vault CRM through 2030, which is the single most revealing data point in the set: Veeva does not need to monetize AI, because Veeva’s moat is the validated record, not the intelligence applied to it.

Aschenbrenner thought AI would eat the applications. Instead, the applications are selling AI as an upsell on top of a subscription the customer cannot afford to cancel – because it costs nothing compared to the value it delivers.

These software companies are computing tollbooths: they’re what enterprises pay to implement compute. And as compute gets cheaper, they will generate vastly more revenue, not less. The proof is sitting there in their earnings and cash flow: they’re riding on lower and lower cost of compute, which makes their business more and more efficient.

Veeva earns 68 cents a year on the dollar. And invests nothing in growing its business.