Software Makers' Best May Not Be Good Enough as AI Fears Mount

AI Uncertainty Threatens Software Maker Stocks as Revenue Growth Continues

Impact of AI on Software Industry Revenue and Investor Sentiment

By Aditya Soni and Deborah Mary Sophia

Salesforce's Revenue Growth Amid AI Concerns

April 22 (Reuters) - Salesforce will likely report its fastest quarterly revenue growth in three years, but analysts say that may not be enough, as fears that artificial intelligence would decimate software makers have sapped investor confidence in the industry.

Reassurances from Software CEOs

Software CEOs such as Salesforce's Marc Benioff have tried to reassure shareholders that proprietary data, decades of enterprise experience and in-house AI offerings would keep customers loyal, even as AI tools from the likes of Anthropic encroach on legal, marketing and customer-service work.    

Market Performance and Sector Selloff

But that has not stemmed a selloff in the sector, with the software and services index down around 16% since the start of the year, widely underperforming the broader S&P 500's 3.2% rise.

Upcoming Earnings and Analyst Expectations

Major SaaS Firms Reporting Schedules

• ServiceNow will kick off earnings for major software-as-a-service firms on Wednesday, followed by Workday and Salesforce likely in May.

Salesforce's Projected Revenue and Profit Trends

• Wall Street expects Salesforce's first-quarter revenue to have increased 12.5% to $9.83 billion, its fastest growth in 13 quarters, according to analysts polled by LSEG.

• But profit growth at the company, one of the most aggressive AI adopters with its Agentforce autonomous agent platform, will likely slow to a near three-year low as costs rise.

Comparative Revenue Growth: ServiceNow and Workday

• Meanwhile, ServiceNow is expected to post slightly faster quarterly revenue growth of 21.1%, while Workday's revenue will likely increase at a slightly slower pace at 12.4%.

Long-Term Outlook and Industry Perspectives

Investor Sentiment and Market Uncertainty

• "From a short-term stock market perspective, nothing (software) companies report this quarter or next quarter can really refute that long-term bear case," said Joe Maginot, portfolio manager at Madison Investments.

• "It's this more existential question on how things will evolve over the coming three, four, five years and even longer."

AI Adoption and Future Opportunities

Strategies for Revenue Growth and Customer Retention

• Experts expect software makers to use earnings to show more aggressively how AI is boosting revenue, how wide their adoption is and whether they are helping retain customers.

Analyst Insights on AI Rollout

• "The opportunity is there for many incumbents to be successful, especially as the rollout of AI in enterprise is going to take many years," Bernstein analysts said.

(Reporting by Aditya Soni and Deborah Sophia in Bengaluru; Editing by Maju Samuel)