This issue is repeatable and the problem occurs when a weapon is upgraded with Swirling. The bonus damage is not applied but the attack still works as an AOE. I am assuming this is an issue since there is an option to upgrade for increased damage and doing so makes no difference. Tier 3 performs exactly the same as tier 1.

Edit: After more testing, I noticed that the damage is only applied to secondary targets, if this is intended then it is possibly something that should be noted in the enchant description.