Investing.com -- Wells Fargo downgraded HubSpot to Equal Weight from Overweight and slashed its price target to $225 from $300, arguing that the software company's broad artificial intelligence transition is creating near-term uncertainty despite strengthening its long-term competitive position.

The downgrade comes as Wall Street increasingly differentiates between software companies already seeing tangible AI-driven revenue gains and those still repositioning their businesses for the technology shift. Wells Fargo said infrastructure software names such as Datadog and Cloudflare remain better positioned into earnings, while HubSpot needs to demonstrate stronger adoption and monetization of its AI products before investor sentiment can improve.

The brokerage said HubSpot is undertaking several strategic initiatives, including changes to AI pricing, go-to-market strategy and product positioning around AI. While Wells Fargo believes these moves are the right long-term decisions, it said they complicate the company's near-term outlook at a time when investors are seeking clearer evidence of improving financial performance and AI monetization.

Wells Fargo cut its price target to $225, citing a more balanced risk-reward profile, and said it would prefer to see stronger traction in HubSpot's AI offerings before becoming more constructive on the stock.

Ahead of second-quarter results, the firm warned that April go-to-market retraining following HubSpot's Spring Spotlight event may have weighed on new annual recurring revenue growth, while tougher comparisons in the second half of the year could limit the size of any full-year guidance increase. It also expects customer adoption of the company's new AI products to remain in the early stages.

Although Wells Fargo remains optimistic that AI agents will ultimately expand the addressable market for application software, it said customers are currently prioritizing spending on AI infrastructure and developer tools over CRM upgrades. The brokerage added that HubSpot's business remains largely seat-based, limiting the financial contribution from AI until adoption broadens.

The firm said it would become more positive if HubSpot demonstrates accelerating adoption of its Breeze AI agents, stronger attach rates across its customer base and clearer evidence that AI is generating meaningful incremental demand and revenue.