Major software companies are gearing up to announce what could be their strongest quarterly performance in years, yet industry analysts warn that even impressive numbers may not calm growing investor anxiety about artificial intelligence reshaping the technology landscape.
Tech executives, including Salesforce CEO Marc Benioff, have been working to convince shareholders that their companies’ unique data assets, extensive business expertise, and custom AI solutions will maintain customer relationships despite emerging AI competitors like Anthropic targeting legal, marketing, and customer service sectors.
However, these reassurances haven’t prevented a significant market downturn in the technology sector. Software and services stocks have dropped approximately 16% since January began, creating a stark contrast with the S&P 500’s 3.2% increase during the same period.
The earnings season for major cloud-based software companies begins Wednesday with ServiceNow’s report, followed by expected announcements from Workday and Salesforce in May.
Financial analysts anticipate Salesforce will announce first-quarter revenue growth of 12.5%, reaching $9.83 billion and marking the company’s strongest expansion in 13 quarters, based on LSEG polling data.
Despite this revenue success, profit margins at Salesforce—which has aggressively embraced AI through its Agentforce autonomous platform—are projected to slow to nearly three-year lows due to rising operational expenses.
ServiceNow is forecast to demonstrate even stronger quarterly revenue expansion at 21.1%, while Workday’s growth is expected to reach 12.4%.
“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,” Maginot explained.
Industry observers anticipate software companies will use their earnings presentations to demonstrate more clearly how artificial intelligence is driving revenue increases, expanding customer adoption, and improving client retention rates.
“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.
