Rightmove's AI Investment Warning Exposes Enterprise AI Reality Gap

AI's awfully exciting until companies want to use it: Rightmove edition

Rightmove's profit warning today -- to paraphrase: 'AI is going to rewire how people shop for houses in ways we don't yet understand and can't yet explain but we'll going to throw money at figuring all this out and you're paying' -- reminded us of something. About a week ago, Jefferies tech analyst Surinder Thind reported back from a visit to last month's Gartner's 2025 IT Symposium in Orlando. It's interesting in the universe of AI sell-side research because it doesn't talk about 13-digit hyperscaler capex and humanoid workforces. Instead, it talks about "a disconnect between business leaders' expectations of what AI can do and reality". We're going to quote at length from Thind's note because it's good. It starts with an observation that, without "a complete deconstruction and reimagination of the enterprise", there are probably no quick-hit returns on investment: What we found at the conference was many AI projects that were being undertaken seemed like they were being done in silos. While this might generate measurable productivity gains in this first generation of initiatives, it will likely not work for the next generation. Many software vendors that were advertising AI solutions, including AI agents, seemed focused on single use cases/workflows. This is not entirely unexpected as the past decade plus has allowed software companies that solve single pain points to thrive. Looking ahead, we believe the real value from Agentic AI will come from an agentic mesh -- a decentralized architecture that allows multiple autonomous AI agents to collaborate and act across different systems, tools, and language models. But the technology isn't quite there yet. Extrapolating from this, we get the sense that procuring all the different AI solutions from software vendors may end up being a significant waste of enterprise spend. We acknowledge there is an "AI arms race" underway, but we're not sure if it is winnable at this point. The big takeaway of the note is that it's very hard to make AI deliver anything useful. According to a McKinsey survey cited by Jefferies, 80 per cent of companies have deployed generative AI in some form for at least one business function. Of the AI adopters, 80 per cent still report no material contribution to earnings from the deployments. Jefferies also cites Gartner estimates that, on average, an AI deployment costs $1.9mn upfront. However, for every 100-day AI deployment there's an extra 25 days of staff training once the system's in place, followed by 100 to 200 days of "change management" to make sure everything's working as promised: Gartner estimates that, on average, for every one AI tool purchased, an organisation will see 10 ancillary, hidden costs they did not anticipate (examples include licensing, legacy integration, managing access credentials for AI agents, comparison testing, security, etc). This means that business leaders who go into the AI procurement process thinking it will cost $1.9mn and take 100 days to implement are actually seeing it cost much more and take much longer, making ROI difficult to achieve. Another underestimated problem is data quality, says Thind. In many conversations we sensed frustration at the inability to scale from pilots due to concerns around data (and governance) issues. According to an AWS presenter, approximately 70% of IT budgets are spent on managing legacy systems, legacy systems cause a 6-18 month delays for rolling out new features in software products, and around 40% of software developer time is spent on managing technical debt. The above becomes a much more serious issue when companies try and implement Agentic AI, because if an organisation does not have clean data and quality data governance policies, AI agents cannot be trusted to execute autonomous functions and make real business decisions based on data that the humans themselves deem untrustworthy. Then there's the problem of turning hypothetical efficiencies into actual revenue growth and cost savings. A gen-AI deployment in the sales department might allow salesfolk to spend less time on the phone, but to deliver tenable business value the deployment has to be cheaper or better than humans. Jefferies cites a Gartner survey that finds 74 per cent of CFOs are seeing productivity gains from AI, but only 5 per cent have managed to cut costs and just 6 per cent saw any kind of revenue uplift. "With so many executives struggling to understand the technology, specifically its potential and its limits, we come away from the conference a bit more confident that the AI disruption narrative will take longer to play out, and perhaps in ways that we may not currently understand or appreciate," writes Thind: Because of the top-down pressure from Boards that we heard about in some conversations, it's hard not to assume significant resources are being spent on products or solutions that ultimately may not further the needs of the business. The Jefferies analyst argues that, eventually, companies wanting to extract value from AI will give up chasing ROI gains through on one-simple-trick stuff and bring in consultants, IT outsourcers, etc, who'll completely rebuild their tech stack and transform how they function. Maybe that's what Rightmove's doing? It's certainly going to be spending outsourcer money, with an extra £12m investment in product going through the P&L and £6m of capitalised expense. And at pixel time, with Rightmove's investor day just starting, the shares are down 16 per cent.

CNBC's UK Exchange newsletter: Rightmove's AI gamble is a cautionary tale for UK investors

The Rightmove app on an App store page on a smartphone.Hollie Adams | Bloomberg | Getty Images Johan Svanstrom, CEO of Rightmove, said: "AI is now becoming absolutely central to how we run our business and plan for the future." "We are already working on a wide range of exciting AI-enabled innovations for the benefit of our partners and consumers, and see vast potential utilising our leading reach and connected data," he added. This share price reaction highlights a major difference between British and American investors. The latter, as they have frequently shown recently, welcome news of a ramping up in AI investment. British investors, by contrast, tend to be wary of anything that smacks of "jam tomorrow." This is not a new phenomenon. As long ago as August 2004, shares of British Sky Broadcasting, suffered a one-day fall of 19% after James Murdoch, its then-CEO, announced the satellite broadcaster would invest hundreds of millions of pounds in technology and infrastructure at the expense of short-term profitability. It is worth noting that, since Friday's sell-off, shares of Rightmove have rallied following a string of broker notes suggesting they had been oversold and giving the investment a warmer reception. But that initial market reaction raises questions over how other British businesses needing to raise AI investment will announce it in the future. To date, there has been little caution on that front. Most U.K. firms recognize the need to embrace AI and references to it in company trading updates have mushroomed over the last year. An analysis of 700 FTSE-100 annual reports published in March by Multiverse, the learning and skills provider, found that 49% of FTSE-100 companies and 48% of U.K. firms this year mentioned AI as part of their strategy. Yet this is not necessarily being matched with sufficient investment. Matt Clifford, author of the U.K. government's AI Opportunities Action Plan and a former advisor to Prime Minister Keir Starmer, warned in September that British firms were falling behind international rivals in their adoption of AI. He told the Royal Television Society conference: "We kid ourselves the U.K. is good at tech. We're good at creative tech but we're the worst adopter of tech in the G7." "And that could result in a perfect storm where financial services are transformed by AI, along with life sciences, but our firms are slower to adopt AI than their international competitors, and they lose share over time," Clifford said. He said U.K. company leaders were "mired in anxiety" about adopting AI, with most implementation currently "bottom up," coming from individual users and engineers. He added: "AI is a bit like teenage sex -- everyone's talking about it but far fewer are actually doing it. And the people who boast about it the most are usually doing the least." It seems likely those furthest behind in AI implementation will be SMEs (Small and Medium-Sized Enterprises) due to a lack of financial resources. But The Race for ROI, a report published two weeks ago by IBM, suggested even larger U.K. businesses are dragging their feet. It found nearly two-thirds of organizations were yet to tap into the full potential of AI -- with most using it mainly to improve productivity or lower costs rather than, for example, enhance customer experience as Rightmove hopes to. It did note, though, that the financial services, energy and utilities sectors were making some progress on this front. High upfront investment costs appear to be a key factor. The Value of AI in the UK, a report published last month by SAP, found that the average British company will invest £15.94 million on AI this year, behind the £27.46 million for the average American company and £31.59 million for the average Chinese company. This is despite the average U.K. business leader expecting AI spending to deliver a 17% return on investment in 2025. Apart from investment costs, a shortage of skills or expertise also looks to be holding back AI implementation, probably due to a lack of training. The Multiverse analysis found that only 34% of FTSE-100 companies and 18% of U.K. firms more broadly referenced AI training in their reports which it noted "appears low for a technology that most companies are striving to adopt." Look hard enough, though, and some companies are getting it right. One is the FTSE-100 online car marketplace Autotrader, which last year launched Co-Driver, a suite of AI powered tools aimed at improving the experience of both car retailers and car buyers by, for example, supporting retailers to create high quality adverts more efficiently and reducing the amount of time it takes for them to advertise their vehicles. Nathan Coe, the CEO, revealed last week the product had already been used by 10,000 customers to create more than one million advertisements. Autotrader is also launching a new AI-powered product, Buying Signals, which uses existing consumer data to flag to a retailer how likely a customer is to buy a vehicle, how local the buyer is and the type of vehicle they are interested in. This is a good example of using AI to expand rather than simply cut costs. If it can successfully emulate Autotrader -- which dominates the U.K. online used car market just as Rightmove does online property -- the latter's shareholders should eventually be well pleased.

Rightmove shares plummet over AI investment plans

Property listing website Rightmove has seen its shares plummet after revealing plans to step up investment in artificial intelligence (AI). Rightmove cut its profit growth forecasts for next year to reflect plans for higher investment in AI as well as other changes intended to increase returns. The company's chief executive, Johan Svanstrom, said AI was "becoming absolutely central" to the running of the business and its plans for the future. But investors were less enthusiastic, and Rightmove's shares had sunk by more than a quarter at one point on Friday. Rightmove announced plans to invest £60m over the next three years and a large part of this investment will focus on AI. "We are already working on a wide range of exciting AI-enabled innovations for the benefit of our partners and consumers," Mr Svanstrom said. The company said it aimed to boost annual revenue growth to more than 10% by 2030. However, it also projected a operating profit growth of 3% to 5% in 2026, which is lower than its forecast of 9% growth this year. Rightmove is planning for its AI investment to pay off in the next three years and said it expects its operating profit to rebound after 2028. Mr Svanstrom said he was confident the investment would "create an even stronger platform and higher-growth business over time". But shares in the company plunged by as much as 28% in early trade on Friday, although they recovered some ground later to stand 13% lower. "Investing for future growth is not a bad thing but the scale of the market's negative reaction implies real scepticism about its decision to put so much money into AI," said Russ Mould, investment director at AJ Bell. "It's possible to see how AI might help Rightmove operate more efficiently, make greater use of its increasing amounts of data and enhance user experience on the site," he added. "However, there is clearly concern that Rightmove is jumping on the bandwagon in dialling up its AI spending."

UK's Rightmove stock tumbles over 28% as AI investments expected to weigh on 2026 profit

The share move marks a new 52-week low for the firm, though it pared some losses and was last trading 12% lower. Share in British real estate listing company Rightmove plummeted as much as 28% on Friday after it warned of lower profit growth on the back of accelerated investments in artificial intelligence. Rightmove projected a operating profit growth of 3% to 5% in 2026, coming in lower than its forecast of 9% growth this year. The firm put the shrinking down to its AI investments as it upgrades internal systems and its consumer-facing app and search tools. It's also looking at newer applications of AI, such as agents. The share move marks a new 52-week low for the firm, though it pared some losses and was last trading 12% lower. UBS analysts said the "strategic pivot poses important questions that the market will not yet have answers to" and moved its price target and rating for Rightmove to under review.

Rightmove shares crashes over 25% after 2026 profit forecast cut on higher AI cost By Investing.com

Investing.com -- Rightmove plc shares sank more than 25% on Friday after the property portal forecast slower profit growth for 2026, citing increased investment in artificial intelligence. The U.K.-based property portal projected revenue growth of 8-10% and underlying operating profit growth of 3-5% next year. RBC said the new guidance implies a 4-6% downgrade to consensus operating profit, reflecting incremental profit and loss investment of £12 million and an additional £6 million in capitalized spending to support future technology and AI development. The £12 million allocation represents about 4% of EBIT growth. RBC in a note said that Rightmove's management is seeking "to take Rightmove to a new level, to harness AI in the way that the founders harnessed the internet." The analysts described the company's strategy as an effort "to accelerate execution through AI" by investing more rapidly in platform enhancements. Rightmove's planned upgrades include an AI-enhanced front end to move its app "beyond just 'finding a home' " and a rebuilt back-end infrastructure "to make their customers' lives easier." The company is also funding research and development to digitize more of the process of buying and renting homes, which remains largely manual, with the goal of creating additional products for agents and developers. For the current year, Rightmove reaffirmed its 2025 guidance. The company expects about 9% revenue growth, within its 8-10% range. Average revenue per advertiser, or ARPA, is projected to grow about 1%, between £95 and £105, compared with consensus estimates of £109. Adjusted EBIT margin is forecast at 70%, in line with both consensus and RBC estimates, and membership numbers are expected to increase about 1% year over year. RBC's analysis indicated that Rightmove's longer-term plan targets annual revenue growth of 8-10% and operating profit growth of 3-10% between 2026 and 2028. Based on the midpoint of that range, operating profit would be about 6% below current consensus by 2028, with an implied operating margin of 67.4% compared with 70.5% consensus. Earnings per share are expected to rise 5-12% a year over the same period, below the 15.8% consensus projection. By 2030, the company aims for revenue growth of more than 10% a year, underlying profit growth above 12% and EPS growth greater than 15% a year. RBC said previously stated revenue ambitions for strategic growth areas, first outlined in 2023, are now likely to be achieved later than 2028. Rightmove's trading update showed mixed housing market conditions. Sales agreed for 2025 to date were up 4% year over year, while listings remained at 10-year highs, 3% ahead of last year. National prices were broadly flat as higher supply and budget uncertainty limited price gains. Rental prices were up from a year earlier, but with slower rent growth and demand. Between July and October, there were 11 enquiries per property, down from 2024 but above the pre-pandemic average of 6-7.

Rightmove Plummets After 2026 Guidance - AI Investments Expected to Weigh on Profits

The British property platform Rightmove tumbled by 16.1 percent, hitting the bottom of the London Stock Exchange following its guidance for 2026. Rightmove expects underlying operating profit growth of 3-5 percent for 2026, weighed down by planned investments in the AI sector. The company anticipates investing u18 million over the year. Revenue growth is projected to reach 8-10 percent next year. At the same time, the forecast for the full year 2025 was reaffirmed. "AI is now absolutely central to how we run our business and plan for the future," said the company's Swedish CEO, Johan Svanström. Meanwhile, Swedish industry peer Hemnet also declined by 4.1 percent in Stockholm.