The Year AI Meets Reality: FTV’s 2026 Predictions

The macroeconomic story of 2025 came with plenty of plot twists. The year began with relative optimism as inflation cooled, but a number of destabilizing forces kicked in quickly: the Federal Reserve’s uneven rate cuts, geopolitical conflicts that threatened supply chains, policy uncertainty – predominantly represented by tariffs – and a series of market jitters.   

These headwinds prolonged challenges in fundraising and dealmaking across the private equity landscape, reinforcing a premium on high-quality businesses with durable business models, disciplined execution and exposure to long-term secular growth themes. Despite this environment, FTV delivered one of its most productive years. In January, we announced the successful launch of FTV VIII and FTV Ascend I with over $4 billion in capital commitments. We’ve since deployed more than $1.8 billion into category-defining companies and generated over $1.1 billion in realizations.

Looking ahead to 2026, one question dominates: AI’s real impact. The time for pure AI experimentation is over; investors and businesses alike are demanding more tangible evidence of ROI. As AI begins reshaping industries and influencing bottom lines, the shrewdest among us are already detecting meaningful signals amid the noise. 

FTV has laid out its sharpest predictions about what lies ahead across the growth investing landscape and our core sectors: enterprise technology and services, healthcare technology and services, financial technology and services and vertical software. We touch on dealmaking dynamics, how to build effectively in highly regulated markets and the points where AI intersects with FTV’s high-growth playbook.

DEALMAKING, INVESTING AND FUNDRAISING

Brad Bernstein, Managing Partner

A more benign regulatory environment will open the floodgates to dealmaking

In the next three years, a more accommodating regulatory environment will spur a wave of deals. Growth equity will continue to have strong deal volumes, with high-growth private businesses continuing to garner premium valuations. That said, every company is weighing their R&D budget for AI against their M&A opportunity set and trying to figure out how best to allocate capital. Lower interest rates should help with financial sponsor activity, but it remains to be seen if strategic volumes will grow dramatically in this environment.

AI will gain traction and ROI automating routine back-office processes, but there’s a reckoning ahead on pricing

Non-differentiated, non-proprietary administrative functions are well suited for AI automation, and we are seeing amazing results by means of streamlining these types of processes and workflows.

The price tag for all this AI innovation, however, is still unclear. In 2026, we’ll see the AI market shift from hype to hard economics as the true cost of AI infrastructure comes to light. As infrastructure subsidies fade and providers raise prices, companies will be forced to scrutinize ROI and pursue more cost-effective, open-source or hybrid solutions. More than $200 billion has poured into AI companies over the past year, but not all those investments will deliver returns, prompting a reckoning that will separate true value creators from those built on inflated expectations. The firms that pull ahead of the pack will be those combining AI with human-in-the-loop quality controls that deliver real, reliable outcomes.

Watch the full prediction here.

Karen Derr Gilbert, Partner and Chief Operating Officer

As AI gains ground, human relationships will be the premium offering

In a year in which AI begins to affect most aspects of business, the value of human relationships will soar. As companies shift to automated outreach and people grow more wary of fraudulent data and information, longstanding trusted networks will be essential. To be sure, AI will continue to reduce friction and eliminate manual processes inside high-growth firms (including this one). But in 2026, the value of relationship-building will reign supreme. This will be especially relevant in investor relations and fundraising, as investors lean toward in-person events with trusted groups, and in deal sourcing and deal-making, where the value of looking someone in the eye has never been more important.

ENTERPRISE TECHNOLOGY AND SERVICES

Alex Malvone, Partner 

With code becoming a commodity, defensibility now shifts to customers, data, trust and domain insight

As AI coding tools become more mainstream, code alone is no longer a defensible moat. The most ambitious companies will rethink what gives them a competitive advantage—whether specialized data, embedded workflows, expertise in a particular vertical or industry or knowledge and credibility with a customer segment. The impact: companies with proprietary datasets, or those with deeply ingrained relationships with customers, will pull ahead of those that may at first seem technically more adept. 

Software that’s tightly integrated into a customer’s workflow—and handles all the messy parts like permissions, billing, compliance and change-management—still creates stickiness that’s hard for generic code to replicate. AI shifts value from the building of software to its operating merits—continuously refining, and learning from usage and experience to solve real, high-value problems for customers.

Kapil Venkatachalam, Partner

One quarter of search ad budgets will migrate to AI

As AI answer surfaces continue to steal clicks from links, Google and Microsoft will create increasingly sophisticated systems for monetizing AI answers. Impact: By the end of 2026, we can expect that 25% of traditional search ad budgets will be either diverted to or influenced by AI.

In cybersecurity, increasingly sophisticated AI will act as both weapon and shield

The gap will widen measurably between organizations that integrate AI into security operations and those that don’t, as automated triage, predictive threat-hunting and unified model monitoring become more important. Attacks will get more sophisticated too: expect AI-driven campaigns, faster exploitation and smarter malware. Expect an increasing share of security spend to move from “hardware + people” to “software + AI ops + governance”.

Giovanni Bacarella, Principal

Data platforms with specialized domain expertise will drive AI automation

In 2026, the real AI winners won’t be the model builders—it will be the vertical data platforms with proprietary, high-fidelity intelligence that forms the backbone of workflow automation. In complex sectors such as maritime and logistics, these providers already sit closest to the problem, are trusted stewards of mission-critical analytics, and bring the domain expertise customers actually rely on. As AI adoption accelerates, their positioning makes them the natural enablers of AI-driven workflow automation.

Jerome Hershey, Principal

Despite AI’s rise, business services will still be alive and kicking

It’s not time to ring the death knell for business services companies. Rather than being replaced by AI, leading services companies are using it to reinvent their delivery models. The winners will combine AI automation with a people-powered “service layer” that delivers classic business services like IT support and payroll processing, especially in complex, regulated or data-sensitive industries. Large, vertically focused providers are best positioned to turn this into advantage. Their deep domain knowledge and embedded customer base create a ripe opportunity to embed AI into workflows and shift toward success-based outcomes that drive measurable impact for customers.

HEALTHCARE TECHNOLOGY AND SERVICES

Alex Mason, Partner

Electronic health record (EHR) platforms will miss the boat on AI adoption, leaving room for specialized AI-native vendors to lead the way

Despite 90% adoption across acute and ambulatory settings in the U.S., EHRs remain constrained by legacy architectures, closed ecosystems and slow innovation cycles. This will create opportunities for agile AI players that can innovate faster and integrate more seamlessly. EHRs will continue to be the systems of record for data storage, but AI-native vendors will emerge as the true systems of intelligence, built to drive action and deliver clinical and operational outcomes for providers. 

An aging population will mean care moves at a blistering pace toward the home

Technology and services that enable at-home and remote care for the elderly will flourish as U.S. demographics continue to shift. By 2034, adults aged 65+ will outnumber children under 18 for the first time in history. Expect rapid growth in remote patient monitoring, virtual nursing, senior benefits management and the infrastructure required to support these innovations.

VERTICAL SOFTWARE

Richard Liu, Partner

AI agents will become the new UX layer in vertical software

Agentic workflows will start seeing meaningful adoption in many vertical markets as AI becomes embedded in everyday software workflows. We are particularly excited about the opportunity for leading vertical software companies to greatly enhance product experiences by leveraging agents to automate tasks like scheduling, surface deeper insights and orchestrate embedded finance flows. We also see tremendous opportunity for improved customer experiences via agents and AI-enabled voice applications. All of this will result in a new user experience layer that drives efficiency, personalization and measurable business impact.

Adam Hallquist, Principal 

Companies will turn complex regulation into a competitive advantage

In 2026, companies that design specialization plus features into vertical software in a way that anticipates and accommodates regulations will create unique regulatory moats in industries like healthcare, finance and manufacturing. As they work proactively with regulators, these companies can create workflows, documentation and audit capabilities that help ensure the success of their customers.

Hyperlocal vertical software development will accelerate in emerging markets

Local vertical software providers in emerging markets will follow the pattern of the U.S. a decade ago, with specialized software for appointment scheduling, restaurant reservations and a variety of services ramping up in markets like India, Southeast Asia and Latin America. These solutions will leverage the local language, regulations and culturally specific knowledge.

Tommy Tighe, Principal 

In govtech, AI will assist with cities’ grittiest tasks

In 2026, AI will become the everyday second operator for city services from transit to public safety to infrastructure. Confronted with staffing shortages, tight budgets and aging assets, local agencies will deploy AI that turns noisy operational data into automated actions. This includes dynamically retiming traffic signals, auto-coding and tagging of inspection videos, inspecting sewer and manhole covers, triaging 911 calls and drafting incident reports. For example: U.S. drivers lost a record 63 hours sitting in traffic in 2024, but traffic signals with active AI monitoring reduced wait time during peak hours by 25%.

For citizens, AI handling tedious manual tasks means smoother-functioning, safer cities where law enforcement and other city employees delegate manual tasks and shift their attention to more consequential work.

FINANCIAL TECHNOLOGY AND SERVICES

Brent Fierro, Partner

Investment in and integration of data and analytics will unlock real-time decisioning in financial services

In 2026, financial institutions will step up their investment in and focus on enterprise data management systems—investing in next-generation data access, aggregation and cleansing tools. With better data, financial institutions can build or add analytics capabilities leveraging integrated data and analytics for real-time decisioning. This will have meaningful outcomes in a number of financial services functions, from loan/insurance underwriting to risk management to trading strategies. 

Furthermore, we expect the integration of data and analytics within the enterprise will spawn a wave of consolidation—including larger financial services and technology businesses acquiring niche data analytics companies in their spaces, and analytics companies acquiring data and/or analytics businesses in order to achieve scale or solve a specific gap (geographical, asset class, functional, etc.). 

Marija Periša Kegel, Principal

Governed, action-taking AI becomes the core engine of productivity across financial institutions

In 2026, AI that can act, safely and under governance, will deliver most of the productivity gains while narrowing performance gaps across financial institutions. With budgets tight across organizations in our Global Partner Network, new initiatives will need to be self-funded and tied to clear KPIs. The teams that win, on the enterprise and vendor sides, will pair clean, well-governed data with real distribution access and the change discipline to put AI assistants to work. The result: faster cycle times, broader quality coverage and lower delivery costs. In financial services, cloud foundations and AI-native partners will help second- and third-tier, along with regional institutions, close capability gaps with the largest banks. In the end, this will shift differentiation to proprietary data, distribution and the speed of governance and decision-making.

FTV Managing Partner Brad Bernstein on AI in 2026