Analysts Warn AI Disruption Affects Software Stocks, Downgrade Adobe and Salesforce

NEW YORK, NY — Analysts at Melius Research have downgraded Adobe‘s stock to a sell rating, drawing attention to the impact of artificial intelligence (AI) on the software industry. This move, announced Monday, reflects concerns that AI is fundamentally altering the landscape of technology and investing.

Melius Research believes the rise of AI is comparable to the earlier transition from on-premise data centers to cloud computing. Companies no longer need to invest in their own data centers, as they can now utilize services like Amazon Web Services (AWS), Microsoft Azure, and Google Cloud.

Historically, major hardware providers such as Dell, Hewlett-Packard, and IBM faced significant declines as the market shifted to cloud solutions. Melius noted, “Just when you thought the coast was clear, their PE multiples kept going lower and lower — from the 20s to mid-single digits.” This decline suggests investor concerns about future growth.

While Microsoft previously faced a similar fate, it adapted by prioritizing cloud services under CEO Satya Nadella, resulting in substantial gains for shareholders. Azure now ranks as the second-largest cloud service by revenue.

As companies lean into AI, Melius warns that the demand for traditional software-as-a-service (SaaS) platforms, like those offered by Adobe and Salesforce, may diminish. “Companies are increasingly understanding that AI tools can help cut expensive knowledge workers with those costly SaaS seats,” the analysts stated.

Salesforce is in a complicated position, as it is both a SaaS provider and a firm embracing AI-driven solutions. While questions linger about its future in the SaaS market, Salesforce is working on a new AI product called Agentforce to enhance client offerings.

Melius maintains, however, that not all companies are facing the same risks. They identified strong growth prospects for cloud providers like Microsoft and Amazon, which continue to attract demand as businesses pivot toward AI.

Despite the downgrade, analysts caution that Salesforce remains essential for many enterprises and that some customers might be slow to exit. Melius has rated Salesforce as a hold-equivalent designation as they evaluate the company’s capacity to adapt to changing demands.

The situation highlights the broader trend within technology sectors, emphasizing the need for companies to innovate amid the disruptive forces of AI.