Salesforce faces tough enterprise software backdrop heading into earnings, says UBS

UBS wrote recent transmission checks with astir 25 endeavor IT executives and partners suggest IT spending maturation remains constrained, peculiarly for non-AI exertion software. The steadfast characterized the broader SaaS request backdrop arsenic challenging and noted conditions whitethorn person tightened implicit the past fewer months.

For Salesforce specifically, UBS wrote that its latest checks were “mixed to in-line,” without grounds of a meaningful pickup successful bookings that would enactment the company’s anticipation for stronger maturation successful the 2nd fractional of the fiscal year. By merchandise area, feedback connected Sales Cloud and Service Cloud was described arsenic steady, portion sentiment astir Marketing Cloud, Commerce Cloud, Tableau, and MuleSoft remained mixed. Responses regarding Agentforce were besides described arsenic much mixed compared with the anterior quarter.

The analysts judge this operation leaves the barroom for a second-half maturation reacceleration comparatively high, fixed the existent request environment. They added determination is uncertainty astir whether Salesforce tin prolong its guidance for improving maturation done the remainder of the twelvemonth if endeavor bundle spending conditions bash not strengthen.

More broadly, UBS wrote that investor sentiment crossed exertion bundle remains subdued, with constricted grounds truthful acold that customers are replacing halfway bundle systems with AI-driven alternatives. While that dynamic whitethorn trim downside hazard successful the adjacent term, it has not yet translated into a wide betterment successful request trends, according to the note.

UBS besides highlighted a cautious banal setup, noting that portion bundle equities person rebounded from anterior lows, the betterment has not been accompanied by a wide uptick successful April oregon May request indicators. The steadfast estimated a 25% to 40% probability that Salesforce could either soften oregon lone modestly execute its second-half acceleration outlook, depending connected end-market conditions.

UBS maintained a 'Neutral' standing connected the stock, reflecting what it described arsenic a equilibrium betwixt muted expectations and ongoing uncertainty astir endeavor bundle spending and the timing of immoderate AI-driven uplift successful halfway exertion demand.

On valuation, UBS noted that Salesforce trades astatine astir 11 times estimated 2026 escaped currency travel and 22 times GAAP earnings, which it described arsenic tenable connected a currency travel ground but little compelling connected earnings.