SaaSpocalypse unlikely as guidance, EPS robust despite AI fears: CLSA

CLSA found that most SaaS companies have either maintained or increased their revenue and margin guidance for the upcoming fiscal year and beaten consensus EPS

The so-called "SaaSpocalypse" — fears that artificial intelligence (AI) will hollow out demand for software-as-a-service (SaaS) platforms and the information technology (IT) services companies that implement them — may be overblown, CLSA said in a research note, pointing to robust guidance and earnings beats across major SaaS players in the latest reported quarter.

 

The brokerage found that most SaaS companies have either maintained or increased their revenue and margin guidance for the upcoming fiscal year and beaten consensus earnings per share (EPS) expectations in the latest reported quarter — implying no visible negative impact of AI on SaaS demand yet.

 

 

At 9:28 AM, Nifty IT gained 2 per cent at 29,709.4. In comparison, NSE Nifty50 was up 0.18 per cent at 23,589.7. 

AI impact on SaaS

CLSA categorises SaaS companies into three types — Systems of Record (SoR), Systems of Engagement (SoE), and Systems of Workflows (SoW). The brokerage argued it is difficult for AI to replace SoR platforms because AI is probabilistic in nature, while SoR platforms require deterministic outputs. AI can, however, enhance SoR platforms by layering an additional interface on top of them.

 

SoE and SoW platforms face a greater risk of disruption since AI can directly substitute their output. Key SoR platforms include SAP, Snowflake, Duck Creek, Guidewire, and Databricks. Key SoE and SoW platforms include ServiceNow, Adobe, Pega, Mendix, OutSystems, Datadog, and Sitecore.

 

On SAP specifically, Infosys stands out in the largecap space for its SAP competency. CLSA noted that SAP project delays at HCL Technologies and Wipro may be more related to client-specific issues rather than any platform-level concern.  Check - TOP GAINERS NSE | TOP LOSERS NSE

Which IT companies have the highest SaaS exposure?

Among largecap IT companies, Accenture, Capgemini, Wipro, and Cognizant have the highest SaaS exposure. Among mid-caps, Persistent Systems ranks highest on SaaS exposure. For ServiceNow capabilities specifically, LTIMindtree has the best set of capabilities in the largecap pool. Hexaware has strong Guidewire capabilities, while Snowflake, Birlasoft, and Persistent are the best ranked within the mid-caps.

Salesforce Q1FY27

Salesforce processed 2.8 trillion tokens during Q1FY27, up over 100 per cent quarter-on-quarter (Q-o-Q), and 3.8 billion agentic work units (AWUs), up 111 per cent Q-o-Q. AgentForce customers in production grew by 50 per cent during the quarter, with global system integrators playing a significant role in integrating multiple application programming interfaces (APIs) into the model context protocol (MCP) layer, which connects to frontier AI models.

 

Overall headcount at Salesforce has grown, but largely in sales, while engineering headcount has remained broadly flat over the last two years due to AI-led efficiency gains. Notably, Salesforce has discontinued reporting role-wise certification data for all its SI partners — a signal that AI is leading to a rejigging of roles across organisations.

Pricing model shift

While AI has necessitated a pricing model shift from seat-based to consumption-based models, CLSA noted that the latest guidance and EPS numbers across SaaS players continue to remain robust. IT companies with strong SaaS partnerships are expected to continue seeing healthy demand for product engineering and implementation-related work.

 

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