Piper Sandler downgrades software stocks on AI shift, macro strain

Investing.com -- European enterprise software stocks are facing rating downgrades as companies grapple with monetizing artificial intelligence in a constrained macroeconomic environment, according to analysts at Piper Sandler in a note dated Tuesday.

Germany’s SAP (NYSE: SAP) was cut to “neutral” from “overweight,” with its price target reduced to €170 from €220. Analysts cited slower-than-expected cloud conversions ahead of a 2027 deadline, as chief information officers prioritize AI adoption over traditional enterprise resource planning (ERP) migrations.

SAP’s exposure to Europe, the Middle East and Africa, which accounted for about 46% of its fiscal 2025 revenue, leaves it vulnerable to regional macroeconomic pressures. A recent oil shock, which could lift inflation and dampen growth in Europe, adds to the uncertainty.

The sector is undergoing what analysts describe as a “SaaS to AI transition” on a compressed timeline. While companies are shifting toward usage-based AI monetization models, meaningful revenue contributions are expected to take time, with limited visibility on forward targets.

Valuation multiples across the sector are being revised lower, reflecting tighter scrutiny on profitability and stock-based compensation. SAP’s fiscal 2026 constant currency cloud backlog growth estimate was trimmed to 23% from 24%.

Despite near-term pressures, analysts said the “data gravity” of ERP systems should support SAP’s competitive position over the medium term.

Elsewhere, collaboration software firms Asana (NYSE: ASAN) and Monday.com (NASDAQ: MNDY) were both downgraded to “neutral,” with price targets set at $7 and $85, respectively.

The collaboration segment is facing increased scrutiny over slowing seat expansion and moderating growth.

Asana’s exposure to the technology sector could accelerate efficiency gains driven by advanced AI models, potentially limiting seat growth, while Monday.com has guided fiscal 2026 revenue growth of 18.3%, below prior consensus expectations of 20.5%.

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