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Morgan Stanley on SaaS: Signs of Life as CRM Screens Better — NOW, TEAM Preferred

Posted on by Eben@CANSLIM Research
Eben@CANSLIM Research's avatarEben@CANSLIM Research

Morgan Stanley says recent large-cap SaaS results have softened the “SaaS is dead” thesis, though it argues a durable rerating still requires clearer proof of AI monetisation, margin resilience and reacceleration. The bank remains positive on ServiceNow (NOW) and Atlassian (TEAM), is less convicted on Workday (WDAY) and Intuit (INTU) near-term, and has turned modestly more positive on Salesforce (CRM) on an improving rate of change in upside to guidance.

Key Takeaways

  • Morgan Stanley’s September 3, 2026 software report argues large-cap application SaaS is “ALIVE” via five pillars: Application Control, Less Seat Dependence, Inference Leverage, Value Expansion and Embedded Distribution.
  • Companies posting CY27 revenue revisions of +/-1% outperformed the broad software group by an average 18% in the five days after CY2Q26 results, versus 4% underperformance a year earlier.
  • Group EV/FCF and P/GAAP earnings entered earnings season roughly 60% below the three-year average, which Morgan Stanley says contributed to the rebound alongside a sentiment shift.
  • Morgan Stanley remains positive on ServiceNow (NOW) and Atlassian (TEAM), is less convicted on Workday (WDAY) and Intuit (INTU), and is incrementally positive on Salesforce (CRM).
  • At CRM, 9 of the top 10 AI companies use Salesforce and Slack, with spend in that cohort up 435% year-on-year in 2Q, supporting the view that model vendors are building on Salesforce’s governed data layer rather than replacing it.

Lead Analysis: What Morgan Stanley’s “SaaS Is ALIVE” Report Says

In a report titled “Signs of Life: Making the Case That SaaS Is ALIVE,” Morgan Stanley analysts Adam Wood, Sanjit K Singh, Elizabeth Porter, Chris Quintero, Ryan Lountzis and Kathleen A Keyser argue that recent large-cap application software prints offered early evidence that SaaS remains viable in the AI era, softening the AI bear case despite limited estimate upside. The team maintains an Attractive industry view on North American Software.

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