Software Giants Push Back Against Growing Fears of AI Disruption
Salesforce and ServiceNow are fighting to convince investors that artificial intelligence will strengthen rather than destroy their businesses, even as the rapid development of AI agents raises questions about the future of traditional enterprise software.
Both companies have seen their shares come under pressure as investors worry that AI could fundamentally change the economics of software sold through recurring subscriptions. The concern is that increasingly capable AI agents may perform tasks that previously required employees to interact with enterprise applications, potentially reducing the number of software users companies need to pay for.
That fear has contributed to a broader selloff in software stocks this year, with investors questioning whether established SaaS companies can maintain their growth and pricing power in an AI-driven market.
Salesforce Uses Massive Buybacks to Signal Confidence
Salesforce has responded in one of the most direct ways available to a public company: buying back its own shares.
The company has committed enormous amounts of capital to repurchases as its stock has fallen sharply. Salesforce completed a $27 billion share repurchase in a single quarter, a move that represents a major bet that the market has underestimated the company’s future prospects.
The buyback is particularly notable because Salesforce is simultaneously trying to convince investors that its AI strategy is beginning to deliver tangible results.
Chief Executive Officer Marc Benioff has repeatedly pushed back against the idea that AI will destroy Salesforce’s business.
Instead, the company argues that AI agents could increase the value of its platform by allowing businesses to automate more work through Salesforce’s ecosystem.
The strategy depends heavily on Agentforce, Salesforce’s platform for deploying AI agents across business operations.
Agentforce Becomes Salesforce’s Main Defense
Salesforce is attempting to transform the AI threat into an opportunity through Agentforce.
The company has reported rapid growth in Agentforce-related activity, with annual recurring revenue reaching approximately $1.2 billion and increasing sharply year over year.
The logic behind the strategy is relatively simple.
If companies use AI agents through Salesforce rather than reducing their reliance on the platform, Salesforce could potentially generate new revenue from AI usage.
That would allow the company to move beyond the traditional model in which customers primarily pay for the number of human employees using its software.
The shift could eventually create a new pricing structure based on AI agents, transactions, data processing or other forms of usage.
This is one of the biggest strategic questions facing Salesforce.
If Agentforce succeeds, AI could become an additional growth engine.
If customers instead use independent AI systems to replace traditional software workflows, Salesforce could face a much more serious structural challenge.
ServiceNow Faces a Similar AI Debate
ServiceNow is dealing with many of the same concerns.
The company provides software that businesses use to manage IT operations, employee workflows, customer service and other corporate processes.
AI agents could potentially automate some of the tasks currently handled by employees through ServiceNow.
That creates a difficult question for investors: if AI reduces the number of employees performing certain tasks, could companies eventually need fewer software licenses?
The concern is especially relevant to ServiceNow because its business has historically benefited from enterprise customers expanding the number of users connected to its platform.
Analysts and investors have increasingly questioned whether the traditional seat-based software model can remain as powerful when AI agents can perform tasks without human users sitting behind every interaction.
ServiceNow Is Betting on AI and Acquisitions
ServiceNow is responding differently from Salesforce.
While Salesforce has emphasized buybacks, ServiceNow has been spending heavily on acquisitions intended to expand its AI, security and workflow capabilities.
The company recently completed its $2.85 billion acquisition of Moveworks, while also pursuing other major deals involving cybersecurity and identity technology. ServiceNow has also announced the acquisition of Veza for around $1 billion and moved forward with a much larger deal for Armis.
The strategy is designed to make ServiceNow more important as companies deploy AI across their organizations.
Instead of allowing AI agents to bypass enterprise software, ServiceNow wants to become the platform through which those agents operate.
That could give the company a central role in managing AI-powered workflows, security and business processes.
However, investors have questioned whether the aggressive acquisition strategy indicates that ServiceNow needs acquisitions to maintain its growth rate.
Investors Fear a Structural Change in Software
The current concerns go beyond individual companies.
Investors are increasingly debating whether AI could fundamentally alter the economics of the entire software industry.
Traditional SaaS companies have historically benefited from highly predictable recurring revenue.
Businesses purchase software subscriptions, add users as they grow and continue paying for access year after year.
AI agents could disrupt that model.
If one AI agent can perform the work previously handled by several employees, companies might eventually need fewer software licenses.
That could reduce the number of paying users even if the business itself continues expanding.
This is one reason Salesforce and ServiceNow have become central examples in the debate over the future of enterprise software.
The Threat Is Real but Not Straightforward
The AI threat should not be interpreted as meaning that enterprise software will simply disappear.
Large companies rely on software platforms for much more than employee interfaces.
Enterprise applications handle:
- Customer records
- Financial information
- Compliance
- Security
- Workflow management
- Data governance
- Audit trails
- Business processes
- Access controls
Replacing these systems entirely with AI-generated applications could create significant security, reliability and regulatory risks.
A recent Reuters analysis noted that concerns surrounding AI-generated coding have pressured software companies, but large businesses still have strong reasons to rely on established platforms because of security, audit requirements and scalability.
That gives Salesforce and ServiceNow an important advantage.
Their software is already deeply embedded in corporate operations.
AI Could Actually Increase Demand for Enterprise Platforms
There is another possibility.
Instead of reducing demand for enterprise software, AI could increase it.
AI agents need access to reliable business data to function effectively.
They need permission systems, security controls and structured information.
They also need platforms capable of connecting different business processes.
Salesforce believes its combination of customer data, applications and Agentforce can provide exactly that environment.
ServiceNow is pursuing a similar strategy by positioning its workflow platform as a control layer for AI-powered business operations.
In this scenario, AI agents would not replace enterprise software.
They would operate inside enterprise software ecosystems.
That could make platforms such as Salesforce and ServiceNow even more valuable.
Valuations Have Become More Attractive
One reason investors are reconsidering software stocks is valuation.
The AI selloff has pushed several major software companies substantially below their previous highs.
Salesforce has traded at a much lower earnings multiple than in earlier periods, while ServiceNow has also fallen significantly from its peak.
For some investors, this creates an opportunity.
If AI fears prove exaggerated, companies with strong recurring revenue, high margins and large enterprise customer bases could eventually recover.
The recent rebound in software stocks suggests that some investors are already beginning to question whether the selloff went too far.
The S&P 500 Software & Services index has recovered strongly in recent months, while strong results from companies including ServiceNow have helped improve sentiment.
Buybacks Can Support Share Prices but Cannot Fix Growth
Salesforce’s aggressive buyback strategy provides an important financial cushion.
Repurchasing shares reduces the number of outstanding shares, which can increase earnings per share when profits remain stable or grow.
It can also signal that management believes the stock is undervalued.
But buybacks cannot solve a structural business problem.
If AI causes Salesforce’s core revenue growth to slow dramatically, financial engineering alone will not restore the company’s previous growth trajectory.
The long-term test will therefore be whether Salesforce can turn AI into a meaningful source of revenue.
The same principle applies to ServiceNow.
Acquisitions can expand its capabilities, but they must ultimately produce stronger growth, greater customer value or better competitive positioning.
The Software Industry Is Entering a New Phase
The current battle between Salesforce, ServiceNow and AI skeptics represents a much larger transformation in technology.
For years, cloud software companies benefited from a straightforward formula: put applications online, charge customers recurring subscription fees and increase revenue as businesses add more employees and users.
AI is challenging that model.
Companies are beginning to ask whether they should continue buying large numbers of software licenses when increasingly capable AI agents can perform work autonomously.
This could lead to a fundamental shift from software sold to people toward software operated by machines.
Companies that adapt successfully could become even more powerful.
Those that fail to adapt could face declining demand.
Competition From AI Companies Adds Pressure
Salesforce and ServiceNow are also competing indirectly with AI companies building increasingly capable general-purpose systems.
AI platforms can now perform tasks such as:
- Writing code
- Analyzing documents
- Creating reports
- Handling customer interactions
- Automating workflows
- Searching company information
- Generating business content
That makes it possible for companies to build customized internal tools without purchasing traditional software for every individual function.
The risk is particularly significant for smaller software vendors.
Large companies such as Salesforce and ServiceNow, however, have advantages in enterprise relationships, security, data integration and compliance.
Their challenge is proving that these advantages remain valuable in an AI-first world.
Investors Are Watching AI Revenue Closely
The next major test will be whether AI products can generate enough revenue to offset concerns about traditional software.
For Salesforce, investors will closely watch Agentforce adoption and the growth of its AI-related recurring revenue.
For ServiceNow, investors will monitor Now Assist, AI-powered workflows and the performance of its recent acquisitions.
The key metrics are likely to shift.
Instead of focusing only on the number of software seats, investors may increasingly examine:
- AI agent usage
- AI-related recurring revenue
- Computing and token consumption
- Automated work completed
- Customer adoption
- AI-related contract values
- Retention rates
These measurements could provide a clearer picture of whether AI is destroying or expanding the enterprise software market.
Looking Ahead
Salesforce and ServiceNow are facing one of the most important strategic challenges in their histories.
The rapid development of AI has created fears that enterprise software could become less valuable as companies use autonomous agents to perform tasks previously handled by human employees.
Those concerns have already contributed to a major selloff across software stocks.
Salesforce is responding with aggressive share repurchases and a major push behind Agentforce, betting that AI will increase the value of its platform rather than undermine it. Its $27 billion quarterly buyback represents an unusually strong statement of confidence from management.
ServiceNow is taking a different approach, using acquisitions and AI-powered workflow products to position itself at the center of enterprise automation. Its purchases of Moveworks, Veza and other technology companies demonstrate the scale of its effort to strengthen its position in an AI-driven market.
The outcome will depend on how businesses actually adopt AI.
If companies use AI agents alongside established enterprise platforms, Salesforce and ServiceNow could emerge as major beneficiaries.
If businesses increasingly replace traditional SaaS applications with cheaper AI-built alternatives, the industry’s economics could change dramatically.
For now, both companies are fighting aggressively against the idea that AI represents an existential threat.
Their biggest challenge is no longer convincing investors that AI is important. It is proving that they can make money from it before AI changes the software industry faster than they can adapt.
