ServiceNow (NOW) and SAP (SAP) are considered among the most “resilient” software companies, even as the major hyperscalers continue to dominate in artificial intelligence, BNP Paribas said.
“We view our January survey results as cautionary for the software sector, reinforcing recent negative sentiment,” analyst Stefan Slowinksi wrote in a note to clients. “Hyperscalers continue to be winners with relatively resilient spend scores reported for Microsoft, AWS and GCP, and increasing demand for public cloud. SAP and ServiceNow stood out positively with improving demand.”
Slowinksi reiterated his Outperform rating and $632 price target on Microsoft (MSFT), but lowered his price target on ServiceNow to $120 from $186.
Additionally, Slowinksi said he was “surprised by [the] deterioration” in the January survey of companies like Datadog (DDOG) and Databricks, both of which topped the survey just two quarters ago.
“We also saw broad decline in leading/trailing survey results for January FY companies, with details to be disclosed in February as part of our formal quarterly results preview process,” Slowinksi added. “And with the geopolitical uncertainty accelerating since the beginning of January, we fear the January quarter end companies will not be able to recapture any underperformance, especially in Europe, in their all-important FQ4, potentially leading to cautious FY outlooks.”
Microsoft is set to report fiscal second-quarter results after the close on Jan. 28. A consensus of analysts expects the company to earn $3.92 per share on $80.28B in revenue.
ServiceNow will also report after the close on Jan. 28. A consensus of analysts expects the firm to earn $0.89 per share on $3.53B in revenue.