Evercore ISI analysts, led by Kirk Materne, have identified Microsoft (MSFT, Financial) and Salesforce (CRM) as the most resilient enterprise software providers. This assessment is based on their broad range of AI products, despite potential slowdowns in software spending due to current market conditions. Other companies like IBM Corp (IBM), Oracle (ORCL), and Workday (WDAY) are considered more vulnerable to such slowdowns.
A recent Evercore survey on enterprise software demand revealed mixed sentiments among respondents. About 40% believe conditions have slightly improved over the past three months, while another 40% think they have slightly worsened. The remaining 20% see no significant change.
The survey highlights that industries linked to U.S. federal, state, and local governments face the most "risk" under the current macroeconomic environment. In contrast, healthcare and technology sectors are experiencing "positive impacts." Retail, finance, and travel-related industries fall somewhere in between.
Salesforce and Microsoft's software products are widely used across various industries, with 95% and 90% of respondents, respectively, indicating usage of their offerings. Additionally, 80% of respondents reported using products from ServiceNow (NOW) and/or Workday.
Materne noted that many negative factors are associated with the Federal Reserve, while industries like healthcare and technology are performing better. If macroeconomic conditions continue to deteriorate, AI and network stocks are expected to remain more resilient. However, from a category perspective, backend software faces the greatest risk.
