The State of Applied AI 2025 Report

The “State of Applied AI 2025” report highlights that 2025 saw a shift from focusing on AI model benchmarks to building reliable AI systems that function effectively in real-world applications. Key developments include a move towards context engineering over simple prompting, the rise of reasoning models and long context windows, and the evolution of RAG and AI agents focused on specific verticals. The report also emphasizes the importance of robust evaluation, solid infrastructure, and addressing new challenges like subtle hallucinations and inconsistent reasoning for successful AI implementation.