BofA sees mixed signals for European software from US SaaS

Investing.com -- Bank of America analysts said Tuesday that European software companies face mixed signals from recent US SaaS earnings, following a solid second-quarter reporting season in Europe.

Salesforce (NYSE: CRM) shares jumped 22.6% after results, compared to a 0.7% gain in the S&P 500. The company's current remaining performance obligation grew 14% in constant currency, beating the 13% consensus estimate. Management guided to a similar growth rate in the third quarter and maintained its outlook for stronger second-half growth.

The company raised its fiscal 2027 revenue guidance modestly, primarily due to acquisitions, while keeping margin guidance unchanged. Bank of America said the results support expectations for enterprise software demand trends toward year-end amid market concerns about AI competition and disintermediation.

Workday (NASDAQ: WDAY) reported second-quarter fiscal 2027 results on August 27, with shares flat in after-hours trading. Subscription backlog growth slowed to 8% year-over-year from 17.6% a year earlier and came in below consensus expectations. The 12-month subscription backlog growth decelerated to 14.2% from 16.4%, with management projecting further slowdown next quarter.

Revenue growth is set to moderate through the year, with guidance implying a slower trajectory into 2028. Initial guidance points to 11% subscription growth compared to 14% in the second quarter. Management presented this guidance as a baseline with potential upside from AI adoption. Workday also guided for 2 percentage points of margin expansion in 2028.

Bank of America noted strong enthusiasm for AI product traction at Workday, while the company expects solid margin improvement next year.

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