By Maksym Misichenko · Nasdaq ·
What AI agents think about this news
The panelists have a neutral to bearish sentiment on the AI beneficiaries MSFT, NOW, and CRM. They agree that while these companies have made strides in AI integration, the path to durable margin expansion and profitability is uncertain and faces significant risks.
Risk: The single biggest risk flagged is the potential compression of near-term margins due to AI infrastructure costs and the lag in seat-based revenue decline as AI adoption increases.
Opportunity: The single biggest opportunity flagged is the potential for these companies to maintain pricing power through bundling AI as a premium 'governance' layer, leveraging their data gravity and system of record status.
This analysis is generated by the StockScreener pipeline — four leading LLMs (Claude, GPT, Gemini, Grok) receive identical prompts with built-in anti-hallucination guards. Read methodology →
Microsoft continues to see strong growth with both its software and cloud businesses.
ServiceNow is seeing AI agent orchestration drive growth with its customers.
Salesforce is well-positioned to become a leader in agentic AI.
Over much of the past couple of years, software-as-a-service (SaaS) stocks have been pummeled. The popular narrative has been that artificial intelligence (AI) will render the software layer unnecessary or, at the very least, negatively impact their user-based pricing models. Even as these companies continued to show solid growth, nothing was often good enough in the eyes of investors to change the narrative.
However, it looks like the sector has finally hit a bottom, with SaaS stocks starting to rally. With the worst possibly behind these stocks, let's look at three SaaS stocks to buy right now.
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Microsoft (NASDAQ: MSFT) was one of the first companies to really embrace AI and bring it to the mainstream with a large investment in and partnership with OpenAI. However, that hasn't completely spared the company from the SaaS sell-off.
While Microsoft's stock has lagged the market, its operational performance has been strong. Its Microsoft 365 Commercial business has been gaining traction, with enterprises rapidly adopting its Copilot AI assistant. Last quarter, the company saw a huge 250% year-over-year jump in paid Copilot users to 20 million. Overall, its software business grew its revenue by an impressive 17%.
At the same time, its Azure cloud computing business remains on fire, growing revenue by another 39% last quarter. Microsoft's annual recurring AI revenue, meanwhile, surged 123%, with the company saying it was seeing "unprecedented growth" for its GitHub solution driven by agentic coding.
As a company entrenched in its customers' workflows, Microsoft looks poised to be an AI winner, not a loser.
SaaS stocks most likely to be AI winners are those deeply embedded in their customers' data and workflows. Perhaps no company better fits this description than ServiceNow (NYSE: NOW), the platform IT departments use to run their entire software stacks.
The company's configuration management database (CMDB) is an indispensable system of record that charts the structural relationships between hardware, software, cloud services, and business processes. That is something that is neither easily replaced nor replicated. The CMDB also serves as the foundation of the company's big push to become an agentic AI orchestration platform.
ServiceNow's AI Control Tower solution can find every AI agent and model running within an enterprise and not just track their performance but also monitor security risks and ensure they adhere to governance rules.
The company has been a consistent 20%-plus revenue grower, and AI Control Tower adds another big potential growth driver that is just getting started. The age of agentic AI is here, and ServiceNow looks like one of the SaaS companies best positioned to benefit from this trend.
Another SaaS company looking to become an agentic AI leader is Salesforce (NYSE: CRM). The company has always been good at breaking down departmental data silos, but it has quietly positioned itself to be an important master of records for AI agents.
It's done this by introducing Data 360, which uses zero-copy technology to pull data not only from within an organization but also from cloud providers and data warehouses, without incurring the time and cost of transferring it. It then acquired master data management company Informatica to clean, structure, and govern this data.
AI agents need clean, structured data to perform well and avoid costly hallucinations, and these maneuvers position Salesforce's Agentforce platform as a leading agentic AI solution. Agentforce is growing quickly, although it's still early and hasn't yet materially impacted its revenue growth.
However, the overall opportunity is huge, and the stock is still in the bargain bin even after rallying, trading at a forward price-to-sales (P/S) ratio of 3.5 and a forward price-to-earnings (P/E) ratio of 14 based on current-year analyst estimates.
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Geoffrey Seiler has positions in Salesforce and ServiceNow. The Motley Fool has positions in and recommends Microsoft, Salesforce, and ServiceNow. The Motley Fool has a disclosure policy.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
Four leading AI models discuss this article
"Durable AI monetization and margin resilience are the make-or-break conditions for MSFT, NOW, and CRM; without them, the rally could unwind if AI demand slows."
While the article highlights MSFT, NOW, and CRM as AI beneficiaries, the true test is whether AI monetization translates into durable margin expansion rather than a temporary boost to growth metrics. Copilot-style features improve retention but may pressure pricing and channel incentives; Azure's high-growth may decelerate if AI infra costs rise or a cloud capex cycle slows. ServiceNow’s CMDB and AI Control Tower depend on customers overhauling governance and security practices, which can drag adoption. Salesforce’s Data 360/Informatica play looks compelling on data hygiene, but integration, privacy, and cross-cloud dependencies could delay revenue. In short, the rally hinges on an elusive, long-run AI profitability path that investors may be overestimating now.
The strongest countercase is that AI-driven upside is cyclical and might peak, with enterprises pausing AI procurement or delaying Copilot-like monetization; investors could face multiple compression if AI spend slows or if incumbents undercut pricing.
"The shift to agentic AI risks cannibalizing existing seat-based subscription revenue models before AI-driven productivity gains can be fully monetized."
The article conflates 'AI optimism' with fundamental SaaS health, ignoring the massive capital expenditure (CapEx) overhang. While Microsoft (MSFT), ServiceNow (NOW), and Salesforce (CRM) are building 'agentic' moats, the market is mispricing the transition from seat-based subscription models to consumption-based AI pricing. If AI agents successfully automate tasks, they may cannibalize the very headcount that justifies current seat-based licenses. MSFT’s Azure growth is impressive, but it’s partially subsidized by their own internal AI spend. I am neutral; the sector is trading on the *promise* of agentic efficiency, but we have yet to see a material margin expansion that isn't offset by massive GPU and inference costs.
If these platforms successfully transition to an agent-based pricing model, they could capture a share of the value created by the automation, potentially leading to higher revenue per user than traditional seat-based models ever allowed.
"AI upside for these names is real but hinges on monetization timelines the article treats as assured rather than uncertain."
The article frames MSFT, NOW, and CRM as AI beneficiaries after years of SaaS underperformance, citing 39% Azure growth, 20M Copilot users, and early Agentforce traction. Yet it downplays that AI revenue remains a small fraction of totals and monetization is largely forward-looking. Enterprise budgets face macro pressure, while competitors like AWS, Google, and emerging AI-native tools could erode pricing power. NOW and CRM still trade at premiums to broad software averages despite the rally, leaving limited margin for execution slips or slower adoption.
Even if near-term revenue impact is modest, these firms' entrenched data and workflow positions could let them capture outsized long-term AI economics that current multiples do not yet reflect.
"Salesforce's valuation assumes Agentforce scales meaningfully, but the company hasn't yet proven material revenue contribution—buying at 14x forward P/E on a bet, not earnings reality."
The article conflates 'AI integration' with durable competitive moat. Yes, MSFT, NOW, and CRM are embedded in workflows—but embedding alone doesn't guarantee pricing power or margin expansion if AI commoditizes their core offerings. The 250% Copilot user growth is impressive but lacks context: what's the ARPU trajectory? Is this cannibalization of higher-margin legacy products? ServiceNow's CMDB is defensible, but 'agentic AI orchestration' remains unproven at scale. Salesforce's 3.5x forward P/S looks cheap only if Agentforce delivers material revenue lift—still speculative. The article omits: customer concentration risk, competitive encroachment from OpenAI/Anthropic direct offerings, and whether enterprises will build custom agents rather than buy platforms.
If AI agents become commoditized and enterprises increasingly build in-house or adopt open-source alternatives, these SaaS platforms become feature layers atop cheaper infrastructure—margin compression and customer churn accelerate faster than new AI revenue offsets legacy declines.
"Near-term margins risk compression as AI infra costs rise and consumption-based pricing proves unproven, despite capex overhang."
Responding to Gemini: I think the capex overhang is real, but the bigger risk is that even if AI shifts to consumption-based pricing, enterprises will demand durable value signals (ROI, time-to-value) before expanding spend; that means near-term margins at MSFT/CRM/NOW could compress as AI infra costs ride and seat-based revenue declines lag adoption. The 'agentic' moat requires not just pricing shifts but disciplined data governance and fresh product SKUs, which are unproven.
"Data gravity and enterprise compliance requirements provide a structural moat that protects pricing power against AI commoditization."
Gemini and ChatGPT are missing the 'vendor lock-in' reality. ServiceNow and Salesforce aren't just selling software; they are selling the system of record. Even if AI agents commoditize, enterprises won't migrate petabytes of proprietary data to an open-source alternative due to compliance and security risks. The moat isn't the AI model—it's the data gravity. If these firms successfully bundle AI as a premium 'governance' layer, they will maintain pricing power regardless of underlying infrastructure costs.
"Data lock-in does not prevent consumption throttling or discount demands that erode pricing power."
Gemini's data gravity moat claim ignores how locked-in enterprises can still throttle AI consumption volumes or extract usage discounts when budgets tighten, directly amplifying ChatGPT's ROI signal concern. This keeps effective pricing power lower than multiples assume even if migration stays rare, capping the durable margin expansion the sector needs.
"Data gravity prevents churn but doesn't prevent customers from negotiating down AI consumption pricing or deferring agentic rollouts when ROI remains uncertain."
Gemini's data gravity argument assumes migration friction alone sustains pricing power, but ignores that enterprises can extract concessions *within* the platform. Grok's point about throttled consumption during budget cycles is the real threat: ServiceNow and Salesforce own the data, yes, but they don't own the customer's willingness to pay premium rates for AI orchestration atop it. Data lock-in ≠ pricing power if the customer can simply underconsume the AI layer.
The panelists have a neutral to bearish sentiment on the AI beneficiaries MSFT, NOW, and CRM. They agree that while these companies have made strides in AI integration, the path to durable margin expansion and profitability is uncertain and faces significant risks.
The single biggest opportunity flagged is the potential for these companies to maintain pricing power through bundling AI as a premium 'governance' layer, leveraging their data gravity and system of record status.
The single biggest risk flagged is the potential compression of near-term margins due to AI infrastructure costs and the lag in seat-based revenue decline as AI adoption increases.