Synopsis
Vibe coding startups are riding high on easy app creation via prompts, but as AI advances and margins shrink, questions grow over their long-term viability, decodes Swathi Moorthy.Listen to this article in summarized format
Now, as AI models grow more powerful and competition intensifies, the focus is shifting from growth to sustainability. Coding was among the earliest AI applications to scale, driven by productivity gains and enterprise adoption. The opportunity to monetise triggered a surge of platforms over the past two years, many of which posted strong growth.
According to PitchBook, the combined valuation of vibe coding platforms rose from $7-8 billion in 2024 to $36 billion in 2025. Annual revenue run rates have also climbed sharply, with Lovable and Emergent reporting $400 million and $100 million in annual recurring revenue, respectively, widening access to AI-led development.
But multiple founders and investors ET spoke to pointed out that unit economics takes a hit, impacting gross margins.
Unit economics, margins
Take pricing. Emergent charges Rs 14,999 a month for its Pro subscription, which includes a one million context window and 750 monthly credits. Its standard plan is priced at Rs 249 for the first month and Rs 1,649 thereafter, as of April 20.
This is comparable to Claude Code, which charges $20 a month for Pro and $100 for Max, though Emergent’s offering bundles database and hosting.
The challenge lies in costs. According to media reports, Lovable’s gross margins stood at 35% in 2025 on revenue generated from 132,000 users, while Replit’s margins ranged from 36% to negative 14% in early 2025. Industry benchmarks place average software gross margins at 70-85%. A Bengaluru-based investor, who did not wish to be named, said lower gross margins are a concern even as the industry will see multiple such players and potentially even model makers enter the market as the technology becomes commoditised.
“This would make business durability and revenue retention a challenge. There are multiple existential threats including larger companies such as Claude being direct competition. While I don’t envision a world where everything is done by Claude, companies need to find a moat as technology no longer is,” he added.
Lovable and Replit did not respond to ET’s queries on sustainability until press time. Mukund Jha, cofounder at Emergent, said the more people use the platform, the better their retention is. “We are built for users who want to build serious applications, with real business needs, and want to digitise their business and monetise such as small and medium businesses and entrepreneurs. For these users, we are seeing retention actually improving,” he said.
On margins, Jha said they are not a concern for the company and described them as healthy, without sharing details.
What are companies doing?
Jha said vibe coding has been around for a while and it is a hard problem to solve. “Coding is only 20% of the process, and there are others such as debugging, testing, deployment, production and scaling with security,” he added. This is what the company is working on. Vibe coding platform Rocket’s cofounder Deepak Dhanak in a recent interaction with ET agreed that technology is no longer a moat as it is increasingly commoditised. To address this issue, the company has launched Rocket 1.0 with three capabilities: solving business problems, building applications and analysing competition post-launch.
Even so, the pace of change remains a challenge, he added. Rapid advances in AI continue to shift competitive advantages, forcing startups to keep innovating.
Pratyush Choudhury, cofounder & general partner at AI-focused early-stage investment firm Activate AI, said coding agents may look similar initially but will evolve into distinct niches. Lovable caters to non-technical and semi-technical users building quick prototypes, while platforms such as Emergent target solopreneurs and small and medium business owners building full technology stacks, he said.
