Linux Foundation decreased Linux spending to 3.2% in 2022

Agreed - cloud and container support drives adoption where it matters, and where many of the application use cases can be found.

I agree that, on the face of it, it kinda sounds absurd, but the kernel doesn't seem to be worse off for it.

Sounds like someone doesn't understand the relative importance of the kernel vs the ancillary parts of Linux. The Linux kernel is overwhelmingly responsible for every aspect or attribute you can think of when you say "Linux is <fill in the blank>" or "Linux supports <blank>" or "Linux does it <blank> way". And likewise, it is where a disproportionate number of fixes happen relative to the entire system - even non-driver, non-security things. There's a reason distros update your kernel every time there's a new graphics driver update, or a new systemd version, and it isn't just a "might as well update the kernel too" sort of thing.