After being marked for dead, software companies have a chance to tell their side of the story.
Excluding Canada’s Olympic hockey teams, no one has had a tougher go recently than software companies. Everyone faces some fear over AI, but software’s diagnosis has been more dire than most. (Author Nassim Taleb was the latest to write software’s eulogy, although he’s not known for his optimism.)
Two software giants — Salesforce and Snowflake — get to make the case for why they’re still very much alive. Both companies report earnings after the bell and will be interested in changing a narrative that’s helped push their stocks down 27% (Salesforce) and 26% (Snowflake) this year.
(Workday, another software company that’s been getting hammered, made the case yesterday why AI is friend, not foe.)
A major problem for software companies is that their opponent is largely hypothetical. Even if both companies report blockbuster earnings, there’s still the counterargument that AI will eventually eat their lunch.
Anthropic has played this game masterfully. The startup has strategically rolled out product announcements for its AI chatbot, Claude. The news has devastated entire industries despite there being no evidence of widespread adoption yet.
Here’s what to look out for from Salesforce and Snowflake when they report:
Salesforce: Marc Benioff’s company is the prototypical enterprise software company. Customer relationship management systems are all about workflow and rely heavily on seat-based subscriptions. That makes Salesforce a prime target for AI automation and a bellwether for other software companies.
Benioff has sought to address competitors head-on with Salesforce’s own AI agents and even contemplated a name change to acknowledge the shift. But Agentforce has had its share of challenges. An internal survey showed that most employees feel AI is increasing their productivity, but Salesforce will want the same positivity coming from outside its walls.
These days, AI might not even be Salesforce’s biggest headache. An off-color joke from Benioff at a recent employee event has outraged many workers and even prompted fellow Salesforce executives to speak out.
Snowflake: The data-warehousing giant might seem like a major beneficiary of AI. Models need tons of data to function. Snowflake helps companies organize and analyze massive amounts of data. Everybody wins!
The potential future isn’t as rosy. Snowflake’s business might not face the direct risk that other software companies struggle with, but it could slide down the totem pole of customers’ tool set. Instead of being considered a crucial software, it could become just another piece of back-end infrastructure.
Snowflake’s own CEO warned of this future, saying models’ desire to have easy access to all types of data means “everything else, the world, is just a dumb data pipe that feeds into that big brain.”
And unfortunately for Snowflake, the value you provide to customers as a “dumb data pipe” is a lot lower, meaning you can’t charge as much.
