Investors are preparing for earnings from several of the largest software-as-a-service firms amid growing unease that artificial intelligence could substantially unsettle the market for enterprise software. Although analysts expect robust revenue gains at companies such as Salesforce, some market participants say that topline strength in the quarter may not be sufficient to restore confidence, given the broader questions raised by AI-driven change.
Wall Street is forecasting that Salesforce will report first-quarter revenue of $9.83 billion, a 12.5% year-over-year increase and the company’s fastest quarterly revenue expansion in 13 quarters, according to analysts polled by LSEG. Despite that projected acceleration, earnings expectations point to a deceleration in profit growth, with Salesforce’s bottom-line momentum likely slowing to near a three-year low as costs rise. The company is among the more aggressive corporate adopters of AI, with initiatives such as its Agentforce autonomous agent platform.
The backdrop for those results is a steep pullback in software stocks. The industry’s software and services index has fallen by around 16% since the start of the year, a performance that contrasts with the broader S&P 500, which has gained 3.2% over the same period. That divergence reflects investor concerns that the arrival of AI tools from new entrants and specialized providers could encroach on tasks historically handled by enterprise software, including legal, marketing and customer-service functions.
Executives at established software vendors have sought to allay those fears by highlighting assets they believe will sustain customer relationships. Company leaders point to proprietary customer data, decades of experience serving enterprises and in-house AI offerings as competitive advantages that will encourage clients to remain with incumbents even as newer AI capabilities emerge.
Still, market participants say these reassurances may not be enough to change the long-term narrative. Joe Maginot, a portfolio manager at Madison Investments, noted that from the perspective of the public markets, the next few reporting periods will be unable to fully challenge the more bearish, long-term case. "It’s this more existential question on how things will evolve over the coming three, four, five years and even longer," he said.
ServiceNow is scheduled to begin earnings reporting for the major software-as-a-service firms on Wednesday, followed by Workday and then Salesforce, which is likely to report in May. Analysts expect ServiceNow to post slightly faster quarterly revenue growth at 21.1%, while Workday’s revenue is forecast to increase by about 12.4%.
Industry analysts and strategists anticipate that software companies will use their upcoming earnings to demonstrate how AI is contributing to revenue growth, the extent of AI adoption among customers, and whether new AI capabilities are helping to retain client relationships. Bernstein analysts observed that the opportunity exists for many incumbent vendors to succeed, particularly because enterprise adoption of AI is likely to be a multi-year process.
Investors will be watching not only headline revenue numbers but also profitability trends and commentary on AI-driven product uptake. For now, the mix of solid revenue expectations, questions over profit margins and persistent strategic uncertainty around AI has left the sector under pressure.