Goldman Sachs Americas Technology: Software: Signals That Could Lead to Stabilization & Feedback from Investor Conversations
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Goldman Sachs synthesized investor feedback collected since January 12, covering the Microsoft/ServiceNow earnings cycle, OpenClaw developments, and volatility following Claude Cowork headlines. Investor concerns primarily center on emerging competition in application software and the return on capital expenditure for infrastructure providers. The bank argues that improving investor sentiment will require two to three quarters of stable fundamentals.
Goldman identifies seven potential signals of stabilization. First, leading indicators stabilizing after roughly four years of deterioration. Second, more AI projects transitioning from custom builds to packaged software. Third, evidence of pricing power where incremental agent costs are passed to customers. Fourth, clearer customer use cases demonstrating domain knowledge driving higher-quality outputs. Fifth, AI-native companies acquiring SaaS businesses for domain expertise. Sixth, companies directly addressing stock-based compensation dilution. Seventh, better visibility on new capacity timelines for IaaS providers.
The report covers Microsoft (Buy), Adobe (Sell), CoreWeave (Neutral), Datadog (Sell), and Intuit (Neutral). Microsoft shares fell approximately 15% since January 28 due to rising capital expenditures without proportional Azure growth, though Copilot unit economics appear favorable. Adobe trades at 15x NTM GAAP P/E versus 26x for peers. Datadog faces competitive risks from Chronosphere in 2026, while Intuit may benefit from OBBBA provisions during tax season.