Fears that artificial intelligence could disrupt Software-as-a-Service companies and weaken enterprise technology spending have become one of the most closely watched themes in the sector. However, the latest results from major software providers point to a different picture, according to CLSA.
After reviewing recent earnings and guidance from companies including Salesforce, SAP, ServiceNow, Adobe, Snowflake and Oracle, the brokerage said there is little evidence so far that artificial intelligence is affecting demand. Most software companies have either maintained or increased guidance, while several have also reported earnings ahead of expectations.
CLSA said the trend carries important implications for information technology services firms with strong Software-as-a-Service capabilities and partnerships.
Among Indian names, the brokerage highlighted Persistent Systems, LTIMindtree, Hexaware Technologies and Birlasoft for their platform expertise, while noting that Persistent Systems ranks highest among mid-cap companies in its assessment of Software-as-a-Service exposure and artificial intelligence capabilities.
CLSA says recent software earnings do not support fears of an AI-driven slowdown
Artificial intelligence has triggered concerns that software vendors could face pressure on growth, pricing and customer spending. CLSA said its review of recent quarterly performance across leading Software-as-a-Service companies does not support that view at this stage.
The brokerage reviewed guidance and operating trends across several major software providers to assess whether artificial intelligence was beginning to affect demand. Based on that analysis, CLSA said recent results remained resilient despite rising concerns about disruption.
CLSA said in the report, “We highlight guidance and the latest quarterly performance of various SaaS players to assess any potential negative impact from AI. While AI has necessitated a pricing model shift from seat-based to consumption-based, latest guidance and EPS numbers continue to be robust.”
According to the brokerage, software spending continues to remain healthy and there is no visible sign yet of an artificial intelligence-led slowdown in demand.
Revenue outlook remains stable across major Software-as-a-Service companies
One of the report’s central conclusions is that leading software companies continue to project healthy business momentum.
CLSA said companies including SAP, Snowflake, Guidewire, Salesforce, ServiceNow, Adobe, Datadog and Workday largely maintained or increased revenue and margin guidance. Several of these companies also delivered earnings ahead of consensus expectations in their latest reported quarters.
Summarising its findings, CLSA said, “Most SaaS players we analysed have either maintained or increased their revenue and margin guidance for the upcoming fiscal year and beaten consensus EPS expectations in the latest reported quarter. This implies no negative impact of AI visible yet.”
The brokerage said the industry appears to be adjusting to artificial intelligence through changes in pricing structures rather than experiencing a deterioration in demand conditions.
Persistent Systems ranks highest among mid-cap firms in CLSA’s assessment
The report also carries implications for Indian information technology companies that derive a meaningful share of business from Software-as-a-Service ecosystems.
According to CLSA, Software-as-a-Service practices account for roughly 10% to 25% of revenues for many systems integrators. The brokerage said firms with deep platform expertise and strong relationships with software vendors remain well placed as enterprises continue investing in implementation, migration and product engineering projects.
Among mid-cap companies, Persistent Systems emerged as the standout name in CLSA’s analysis.
The brokerage said, “Within the large caps, ACN, CAP, Wipro and CTSH have the highest SaaS exposure; for mid-caps, our HC-O-PF rated PSYS ranks on top.”
Persistent Systems also ranked first among mid-cap firms in CLSA’s artificial intelligence capability rankings, strengthening the brokerage’s positive assessment of the company’s positioning within the software ecosystem.
LTIMindtree, Hexaware and Birlasoft also feature prominently in platform rankings
Beyond Persistent Systems, CLSA identified several companies with notable strengths across software platforms.
The brokerage highlighted LTIMindtree as one of the strongest players in the ServiceNow ecosystem among large-cap information technology firms. According to CLSA, the company’s capabilities position it well to benefit from enterprise spending on workflow automation and digital transformation initiatives.
CLSA also pointed to Hexaware’s strength in Guidewire-related work.
The brokerage said, “Hexaware has strong Guidewire capabilities while Snowflake then Birlasoft then Persistent are the best ranked within the mid-caps.”
According to CLSA, specialised platform expertise continues to be an important differentiator as enterprises expand software deployments and integrate artificial intelligence capabilities into existing systems.
Salesforce data points to growing adoption of artificial intelligence tools
Salesforce featured prominently in CLSA’s analysis because of the company’s growing artificial intelligence ecosystem and the role played by systems integrators.
The brokerage noted that Salesforce processed 2.8 trillion tokens during the quarter, more than doubling sequentially, while agentic work units increased 111% quarter on quarter to 3.8 billion. AgentForce customers in production increased 50%, reflecting broader adoption of artificial intelligence-enabled services.
CLSA said, “AgentForce customers in production grew by 50% and global SIs had a big role to play in integrating multiple APIs into MCP layer that connects with frontier AI models.”
The brokerage said the trend highlights the continued importance of systems integrators in helping enterprises deploy and manage increasingly complex software environments.
CLSA says systems of record remain better protected from disruption
The report also examined which parts of the Software-as-a-Service market appear more resilient in an artificial intelligence-driven environment.
According to CLSA, systems of record such as SAP and core Salesforce functions face a lower risk of disruption because they serve as authoritative data repositories and require consistency and reliability.
CLSA said, “It is difficult for AI to replace SoR because AI is probabilistic in nature while SoR require deterministic outputs.”
The brokerage said artificial intelligence is more likely to sit on top of these platforms and enhance their capabilities rather than replace them. By contrast, systems of engagement and workflow applications face a higher risk of disruption because some of their functions can potentially be replicated by artificial intelligence tools.
Strong Software-as-a-Service partnerships remain important for IT services firms
CLSA said software ecosystems continue to create meaningful opportunities for systems integrators despite concerns surrounding artificial intelligence.
The brokerage said, “Strong SaaS capabilities and partnerships continue to be important for SIs.”
According to CLSA, continued growth across major software platforms should support demand for implementation services, migration projects, customisation work and product engineering engagements. The brokerage’s assessment suggests that companies with established expertise across leading software ecosystems remain well positioned as enterprises continue investing in technology transformation.
Conclusion
CLSA’s review of major Software-as-a-Service companies suggests that concerns about widespread artificial intelligence-led disruption have yet to appear in reported results. The brokerage found that most software providers continue to maintain or increase guidance, while several also exceeded earnings expectations.
For Indian information technology firms, CLSA said strong Software-as-a-Service partnerships and platform expertise remain important competitive advantages. Persistent Systems emerged as the brokerage’s highest-ranked mid-cap company in the space, while LTIMindtree, Hexaware and Birlasoft also featured prominently across platform-specific assessments. According to CLSA, the evidence from recent software earnings points to continued demand for implementation, integration and engineering work as enterprises expand their use of software and artificial intelligence tools.
Disclaimer: The investment ratings, target expectations, and enterprise spending projections discussed in this report are based on institutional research analysis and do not constitute direct buy, sell, or hold recommendations for retail investors. Information technology services and Software-as-a-Service (SaaS) investments are subject to rapid technological shifts, evolving pricing models, client capital expenditure cycles, and global macroeconomic conditions, meaning individual stock performance can vary widely. Readers are strongly advised to consult a SEBI-registered investment advisor or qualified financial professional before making specific equity or sector-specific allocation decisions.
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