NOW, CRM, WDAY and ADBE: Bargains after SaaS reset?

Major enterprise software stocks have dropped sharply this year amid investor concerns that advanced AI could reduce demand for third-party applications. ServiceNow (NOW) is down about 35% year-to-date, while Salesforce (CRM), Workday (WDAY) and Adobe (ADBE) have each fallen more than 40%.

Forward price-to-earnings multiples in the sector have fallen well below five-year averages. The S&P 500’s forward P/E is near 23. Workday’s forward P/E is about 11, below the sector median of 24 and its five-year average near 40. ServiceNow trades at a forward P/E of roughly 24 versus a five-year average around 61. Adobe’s forward P/E is about 8.3, down from a five-year average near 27. Salesforce’s forward P/E is near 11 compared with a historical average around 31. Other software names including Intuit, AppLovin, The Trade Desk and Oracle have seen similar multiple compression.

Company results show ongoing revenue growth even as valuations contract. ServiceNow reported first-quarter revenue of $3.7 billion, up 22%, with subscription revenue about $3.67 billion; management raised its forward outlook and analysts forecast roughly 22% revenue growth this year and about 19% next year. Workday is projected to grow annual revenue by roughly 11% in the current year and about 10% in 2026. Salesforce is forecast to register similar rates over the next two years, with some analysts noting part of the expansion reflects recent sizable acquisitions. Adobe is expected to grow revenue by about 11.5% this year and roughly 9% next year. Those projected rates are below many of the firms’ historical peaks.

Investor concern has centered on the possibility that advanced AI models and autonomous agents could enable companies to cut software spending or build internal alternatives, a theme referred to as the ‘SaaSPocalypse.’ At the same time, several large software vendors are adding AI features to their products and launching dedicated AI offerings. Salesforce introduced Agentforce, a generative-AI tool that the company reports is in use at thousands of customer sites. Company executives have described plans to use AI to automate internal tasks and streamline operations.

Market flows earlier this year favored memory and storage suppliers tied to AI infrastructure. Names such as SanDisk, Micron, Seagate and Western Digital led gains as investors allocated to infrastructure that supports advanced AI models. Some investors expect capital could shift back toward software if risk appetite changes.

Analysts and investors note differences between companies can affect outcomes: exposure to automation risk varies by product and customer base, recurring subscription economics and levels of enterprise integration differ, and acquisitions can boost short-term revenue. Several large SaaS providers reported quarter-to-quarter revenue gains even as market valuations contracted. Market participants say they will watch upcoming earnings, guidance updates and the pace of AI feature rollouts to reassess whether current multiples reflect a structural change or a temporary repricing.