Software Industry Faces AI Disruption and Investment Opportunities
Written by Emily J. Thompson, Senior Investment Analyst
Updated: 2 hours ago
0mins
Should l Buy CRM?
Source: Fool
- Market Reaction: The software industry has faced a sharp 21.7% decline at the start of 2026 due to AI product releases, raising investor concerns about whether AI agents will replace software licenses, which has negatively impacted overall investment sentiment.
- Divergent Analyst Views: Two prominent Wall Street analysts, Tom Lee and Dan Ives, have opposing views on the software sector's outlook, with Lee suggesting AI will disrupt the industry while Ives sees this as a golden buying opportunity, highlighting the varied interpretations of AI's impact.
- Executives' Perspectives: Many tech executives believe the market's fears are overblown; Nvidia CEO Jensen Huang noted that AI will likely utilize existing software tools, while ServiceNow CEO Bill McDermott emphasized the flexibility of their hybrid pricing structure, showcasing different strategies in addressing AI challenges.
- Future Uncertainty: Software companies face the challenge of integrating LLMs to maintain value, and while some may navigate this successfully, investors should prepare for future uncertainties, especially given the historically high valuations of software stocks.
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Analyst Views on CRM
Wall Street analysts forecast CRM stock price to rise
39 Analyst Rating
29 Buy
9 Hold
1 Sell
Moderate Buy
Current: 184.290
Low
223.00
Averages
326.40
High
405.00
Current: 184.290
Low
223.00
Averages
326.40
High
405.00
About CRM
Salesforce, Inc. is a provider of customer relationship management (CRM) technology. The Company helps organizations of any size reimagine their business for the world of artificial intelligence (AI). With Agentforce, its platform, organizations can bring humans together with AI agents to drive customer success on one deeply unified platform. With the Salesforce platform, it delivers a single source of truth, connecting customer data with integrated AI across systems, apps and devices to help companies sell, service, market and conduct commerce from anywhere. Agentforce is a new layer of the Salesforce platform that enables companies to build and deploy AI agents that can respond to inputs, make decisions and take action autonomously across business functions. Agentforce includes a suite of customizable agents for use across sales, service, marketing and commerce. Datablazer is a data-driven innovator, which leverages the Company’s platform to unlock insights and drive decisions.
About the author
Emily J. Thompson
Emily J. Thompson, a Chartered Financial Analyst (CFA) with 12 years in investment research, graduated with honors from the Wharton School. Specializing in industrial and technology stocks, she provides in-depth analysis for Intellectia’s earnings and market brief reports.
Salesforce Earnings Outlook Amid AI Momentum
- AI-Driven Growth: Salesforce reported nearly $1.4 billion in annual recurring revenue from its Agentforce and Data 360 products in Q3, reflecting a remarkable 114% year-over-year increase, indicating strong momentum in AI that could drive future revenue growth.
- Free Cash Flow Increase: The company achieved $2.2 billion in free cash flow during Q3, up 22% year-over-year, demonstrating its ability to maintain robust cash flow while integrating AI, thereby enhancing financial stability.
- Revenue Growth Deceleration: Despite a 9% year-over-year revenue growth in Q3, the slowdown from the previous quarter's 9% raises concerns among investors about whether Salesforce's AI offerings might be cannibalizing its core business, potentially impacting stock performance.
- Future Revenue Commitments Growth: Salesforce's constant-currency growth rate of its future revenue commitments (cRPO) rose 11% year-over-year in Q3, indicating potential revenue acceleration in the next 12 months, which could bolster overall revenue performance if sustained.
See More
Market Analysis: Software vs. Value Stocks
- Market Situation: As of February 13, 2026, software and AI stocks are facing sell-offs, while value stocks are trading at a high price-to-earnings ratio of 50, indicating a divergence in market sentiment towards different stock types.
- Investor Sentiment: The decline in software and AI stocks reflects investor concerns over high-valuation tech stocks, potentially leading to a shift in capital towards more value-oriented investments, thereby impacting overall market dynamics.
- Value Stock Performance: Despite economic uncertainties, value stocks continue to perform strongly with a P/E ratio of 50, indicating sustained market confidence and demand for these equities.
- Future Outlook: As the market adopts a cautious stance towards tech stocks, investors may reassess their portfolios, shifting towards more stable value stocks to mitigate potential market volatility.
See More
Software Industry Faces AI Disruption and Investment Opportunities
- Market Reaction: The software industry has faced a sharp 21.7% decline at the start of 2026 due to AI product releases, raising investor concerns about whether AI agents will replace software licenses, which has negatively impacted overall investment sentiment.
- Divergent Analyst Views: Two prominent Wall Street analysts, Tom Lee and Dan Ives, have opposing views on the software sector's outlook, with Lee suggesting AI will disrupt the industry while Ives sees this as a golden buying opportunity, highlighting the varied interpretations of AI's impact.
- Executives' Perspectives: Many tech executives believe the market's fears are overblown; Nvidia CEO Jensen Huang noted that AI will likely utilize existing software tools, while ServiceNow CEO Bill McDermott emphasized the flexibility of their hybrid pricing structure, showcasing different strategies in addressing AI challenges.
- Future Uncertainty: Software companies face the challenge of integrating LLMs to maintain value, and while some may navigate this successfully, investors should prepare for future uncertainties, especially given the historically high valuations of software stocks.
See More
Meta Deepens Partnership with Nvidia; Market Dynamics Analysis
- Meta and Nvidia Partnership: Meta commits to purchasing millions of Nvidia chips for its AI data centers, reflecting ongoing demand for AI hardware as Nvidia shares rise nearly 2% while Meta remains flat, indicating intensified competition in the sector.
- Palo Alto Networks Earnings: Despite reporting a quarterly beat, Palo Alto Networks shares fell over 6% after the company lowered its full-year earnings guidance, highlighting market concerns regarding profitability and a reassessment of the cybersecurity sector.
- Cadence Design Systems Surge: Shares of Cadence Design Systems jumped 7% following better-than-expected results and guidance, enhancing its position in the semiconductor design software market and positively impacting its partner Nvidia.
- Western Digital Debt Reduction Plan: Western Digital plans to sell over $3 billion of its Sandisk stake to reduce debt; although Sandisk shares are on a three-day decline, they have gained over 140% year-to-date, reflecting strong demand in the memory storage market.
See More
Salesforce's Shift Impacts Heroku Users
- Heroku Strategic Shift: On February 6, Salesforce announced that Heroku would adopt a 'sustaining engineering model,' meaning while the platform will still receive support, no new features will be developed, significantly diminishing its market competitiveness and likely leading to customer attrition.
- Customer Migration Opportunity: DigitalOcean quickly published a migration guide to assist Heroku users in transitioning to its App Platform, offering three months of free service, indicating a strong appeal to Heroku customers that could accelerate its revenue growth.
- Accelerating Revenue Growth: DigitalOcean reported a 16% year-over-year revenue increase in Q3 and raised its 2025 outlook due to a doubling of AI revenue, indicating a significant rise in popularity among larger clients, with revenue from those spending over $100,000 annually soaring by 41%.
- Intensifying Market Competition: As Salesforce pivots towards AI products, Heroku users may migrate to various cloud platforms, with DigitalOcean's App Platform providing similar convenience to Heroku, potentially leading to accelerated revenue growth in 2026.
See More
Salesforce Halts Development on Heroku PaaS Platform
- Heroku Development Halted: Salesforce has announced the cessation of development on its popular PaaS platform, Heroku, which will continue to operate but without new features, likely forcing customers to seek alternative providers and potentially leading to customer attrition.
- Increased Market Competition: DigitalOcean's App Platform is seen as a primary alternative for Heroku customers, quickly releasing a migration guide and offering three months of free service to attract users, capitalizing on the opportunity presented by Salesforce's decision.
- Accelerating Revenue Growth: DigitalOcean reported a 16% year-over-year revenue increase in Q3, raising its 2025 outlook due to a doubling of AI revenue, with revenue from customers spending over $100,000 annually soaring by 41%, indicating its growing popularity among larger clients.
- Strategic Shift Impact: Salesforce's pivot towards AI products like Agentforce may explain the halt in Heroku development, while DigitalOcean offers a more comprehensive solution by combining IaaS and PaaS services, expected to attract more Heroku customers in 2026 and further drive revenue growth.
See More
Salesforce Earnings Outlook Amid AI Momentum
- AI-Driven Growth: Salesforce reported nearly $1.4 billion in annual recurring revenue from its Agentforce and Data 360 products in Q3, reflecting a remarkable 114% year-over-year increase, indicating strong momentum in AI that could drive future revenue growth.
- Free Cash Flow Increase: The company achieved $2.2 billion in free cash flow during Q3, up 22% year-over-year, demonstrating its ability to maintain robust cash flow while integrating AI, thereby enhancing financial stability.
- Revenue Growth Deceleration: Despite a 9% year-over-year revenue growth in Q3, the slowdown from the previous quarter's 9% raises concerns among investors about whether Salesforce's AI offerings might be cannibalizing its core business, potentially impacting stock performance.
- Future Revenue Commitments Growth: Salesforce's constant-currency growth rate of its future revenue commitments (cRPO) rose 11% year-over-year in Q3, indicating potential revenue acceleration in the next 12 months, which could bolster overall revenue performance if sustained.
See More
Market Analysis: Software vs. Value Stocks
- Market Situation: As of February 13, 2026, software and AI stocks are facing sell-offs, while value stocks are trading at a high price-to-earnings ratio of 50, indicating a divergence in market sentiment towards different stock types.
- Investor Sentiment: The decline in software and AI stocks reflects investor concerns over high-valuation tech stocks, potentially leading to a shift in capital towards more value-oriented investments, thereby impacting overall market dynamics.
- Value Stock Performance: Despite economic uncertainties, value stocks continue to perform strongly with a P/E ratio of 50, indicating sustained market confidence and demand for these equities.
- Future Outlook: As the market adopts a cautious stance towards tech stocks, investors may reassess their portfolios, shifting towards more stable value stocks to mitigate potential market volatility.
See More
Software Industry Faces AI Disruption and Investment Opportunities
- Market Reaction: The software industry has faced a sharp 21.7% decline at the start of 2026 due to AI product releases, raising investor concerns about whether AI agents will replace software licenses, which has negatively impacted overall investment sentiment.
- Divergent Analyst Views: Two prominent Wall Street analysts, Tom Lee and Dan Ives, have opposing views on the software sector's outlook, with Lee suggesting AI will disrupt the industry while Ives sees this as a golden buying opportunity, highlighting the varied interpretations of AI's impact.
- Executives' Perspectives: Many tech executives believe the market's fears are overblown; Nvidia CEO Jensen Huang noted that AI will likely utilize existing software tools, while ServiceNow CEO Bill McDermott emphasized the flexibility of their hybrid pricing structure, showcasing different strategies in addressing AI challenges.
- Future Uncertainty: Software companies face the challenge of integrating LLMs to maintain value, and while some may navigate this successfully, investors should prepare for future uncertainties, especially given the historically high valuations of software stocks.
See More
Meta Deepens Partnership with Nvidia; Market Dynamics Analysis
- Meta and Nvidia Partnership: Meta commits to purchasing millions of Nvidia chips for its AI data centers, reflecting ongoing demand for AI hardware as Nvidia shares rise nearly 2% while Meta remains flat, indicating intensified competition in the sector.
- Palo Alto Networks Earnings: Despite reporting a quarterly beat, Palo Alto Networks shares fell over 6% after the company lowered its full-year earnings guidance, highlighting market concerns regarding profitability and a reassessment of the cybersecurity sector.
- Cadence Design Systems Surge: Shares of Cadence Design Systems jumped 7% following better-than-expected results and guidance, enhancing its position in the semiconductor design software market and positively impacting its partner Nvidia.
- Western Digital Debt Reduction Plan: Western Digital plans to sell over $3 billion of its Sandisk stake to reduce debt; although Sandisk shares are on a three-day decline, they have gained over 140% year-to-date, reflecting strong demand in the memory storage market.
See More
Salesforce's Shift Impacts Heroku Users
- Heroku Strategic Shift: On February 6, Salesforce announced that Heroku would adopt a 'sustaining engineering model,' meaning while the platform will still receive support, no new features will be developed, significantly diminishing its market competitiveness and likely leading to customer attrition.
- Customer Migration Opportunity: DigitalOcean quickly published a migration guide to assist Heroku users in transitioning to its App Platform, offering three months of free service, indicating a strong appeal to Heroku customers that could accelerate its revenue growth.
- Accelerating Revenue Growth: DigitalOcean reported a 16% year-over-year revenue increase in Q3 and raised its 2025 outlook due to a doubling of AI revenue, indicating a significant rise in popularity among larger clients, with revenue from those spending over $100,000 annually soaring by 41%.
- Intensifying Market Competition: As Salesforce pivots towards AI products, Heroku users may migrate to various cloud platforms, with DigitalOcean's App Platform providing similar convenience to Heroku, potentially leading to accelerated revenue growth in 2026.
See More
Salesforce Halts Development on Heroku PaaS Platform
- Heroku Development Halted: Salesforce has announced the cessation of development on its popular PaaS platform, Heroku, which will continue to operate but without new features, likely forcing customers to seek alternative providers and potentially leading to customer attrition.
- Increased Market Competition: DigitalOcean's App Platform is seen as a primary alternative for Heroku customers, quickly releasing a migration guide and offering three months of free service to attract users, capitalizing on the opportunity presented by Salesforce's decision.
- Accelerating Revenue Growth: DigitalOcean reported a 16% year-over-year revenue increase in Q3, raising its 2025 outlook due to a doubling of AI revenue, with revenue from customers spending over $100,000 annually soaring by 41%, indicating its growing popularity among larger clients.
- Strategic Shift Impact: Salesforce's pivot towards AI products like Agentforce may explain the halt in Heroku development, while DigitalOcean offers a more comprehensive solution by combining IaaS and PaaS services, expected to attract more Heroku customers in 2026 and further drive revenue growth.
See More
