Inside today’s Daily Journal…

Editor’s note: Porter has turned the Journal over to Porter & Co. analyst Jared Simons. Jared is part of the Complete Investor team as well as the architect of the weekly Sunday Stock Screen features. Today, he provides insights into the debate about whether artificial intelligence is killing the software industry.

Here’s Jared…

On February 3, the software sector experienced what traders at global investment bank Jefferies christened the “SaaSpocalypse” – an industry-crushing day for software-as-a-service (“SaaS”) stocks.

In a single trading session, $285 billion in market cap evaporated from enterprise software stocks. Within 30 days, the carnage widened to $2 trillion. At its April 10 trough, the iShares Expanded Tech-Software ETF (IGV) had fallen 35% from its 2025 high. On the individual company level, shares of ServiceNow (NOW) fell 65%, Adobe (ADBE) 51%, Salesforce (CRM) 54%, and Microsoft (MSFT) slid 34%.

The catalyst was specific – Anthropic’s Claude Cowork launch and a string of disappointing earnings – but the underlying repricing had been building for more than three years. Public SaaS growth rates had declined every single quarter since 2021. Artificial intelligence (“AI”) simply gave the market permission to mark down what fundamentals had been signaling all along.

The consensus narrative – “AI kills SaaS” – was expected. What’s actually happening is more nuanced and, for the right companies, far more bullish. You see, SaaS isn’t dying. It’s undergoing a forced metamorphosis from passive infrastructure into active intelligence. The companies that survive this paradigm shift will be more valuable than the old SaaS ever was.

This is the playbook for understanding who wins, who dies, and where the asymmetric opportunity lies.

The Bear Case: Startups will use AI to build cheaper versions of Salesforce, the leading customer relationship management platform

The Reality: People love to call Salesforce a “legacy dinosaur,” but those people are missing the Bloomberg Effect. At Porter & Co., we don’t pay for the big-ticket Bloomberg terminal because we like the 1990s user interface. We pay because we’re held hostage. Our analysts have built so much proprietary logic and custom data-tracking into the terminal that ripping it out would kill our workflow.

Incumbents like Salesforce and ServiceNow own the “enterprise memory” – years of your company’s specific rules, data graphs, and institutional knowledge baked in. If you own the data and the habit, you are better positioned to deploy AI than any upstart fighting for access and distribution.

The early evidence – and the most recent quarter – validates this thesis. Salesforce closed fiscal 2026 with $41.5 billion in revenue, up 10% year-over-year, and its AI-driven Agentforce platform hit $800 million in annual recurring revenue (“ARR”), growing 169% with over 60% of Agentforce bookings coming from existing customer expansion. As of Q1 fiscal 2027 (reported May 27, 2026), Agentforce has crossed $1 billion in ARR. Quarterly revenue rose 13% to $11.13 billion, and management raised full-year FY27 guidance to $46 billion.

The installed base isn’t fleeing, rather it’s doubling down. Add the more than 28.6 trillion tokens processed to date (up 152% for the quarter) and 3.8 billion Agentic Work Units (“AWU”) delivered across Agentforce and Slack – AI executing real work inside the customer’s own data context – and that’s what’s keeping the newcomers away.

The Bear Case: SaaS is a saturated market with no room for growth

The Reality: The market is fundamentally mispricing the opportunity. Global SaaS is a $400 billion sandbox. The U.S. labor market is a $13 trillion opportunity.

Traditional software was just a “filing cabinet” – a passive place where you recorded what humans did. The winners of this cycle are changing – they aren’t just storing data. They are the “brain” that receives a messy inbox of tasks and delivers that information to the critical stakeholders to more efficiently perform their job. When software stops being a tool and starts being the worker, it stops competing for the software budget and starts eating the $13 trillion labor budget.

The shift from Software-as-a-Service to Service-as-Software is the new thesis. Tax and business advisory firm Deloitte predicts that up to half of organizations will put more than 50% of their digital transformation budgets toward AI automation in 2026, with agentic AI investment reaching 75% of companies. Tech research firm Gartner projects that by 2030, 40% of enterprise SaaS spend will shift toward usage-, agent-, or outcome-based pricing. The addressable market isn’t shrinking. It’s exploding beyond what traditional SaaS ever captured.