AI Disruption Looms Over SaaS Sector: Wall Street Bears in Unison, Adobe (ADBE.US) and Salesforce (CRM.US) Ratings Sink to Multi-Year Lows

Odaily Finance APP noted that concerns about the impact artificial intelligence will have on software companies have prompted a growing number of Wall Street analysts to recommend selling shares of Adobe (ADBE.US) and Salesforce (CRM.US), reaching a level of bearish sentiment not seen in years.

Morgan Stanley is the latest institution to warn of this risk, downgrading the stock ratings of both companies as well as several others in the industry. Since early June, at least five firms (including Stifel, Evercore ISI, Wolfe Research, and Phillip Securities) have downgraded Adobe, and within 2026, more than a dozen institutions have lowered their ratings.

After these downgrades, Adobe’s overall recommendation rating (a metric that measures the balance of “buy,” “hold,” and “sell” ratings) has dropped to 3.3 points (out of 5). Data shows this is the lowest level since the 1990s. As for Salesforce, after recent downgrades from Morgan Stanley and KeyBanc Capital Markets, citing its Agentforce AI product, the score fell to 4.4, marking a new low since 2012.

These moves highlight the market’s cautious attitude toward the software sector. Fears that competition from AI services will permanently erode the industry’s growth potential, pricing power, and gross profit margins have led to heavy selling pressure on the sector this year.

Morgan Stanley analyst Adam Wood wrote, “As the disruptive debate around generative AI intensifies and clouds the pathway to an annual recurring revenue (ARR) reacceleration, Adobe’s concurrent transformation—adopting a freemium model, undergoing leadership changes, and reinvesting—has increased execution risk.”

Wood added that although current valuations have priced in “most of this disruptive risk,” Adobe’s simultaneous transformation reduces visibility—thus weakening confidence in the potential timing and strength of its business performance stabilization and recovery.

Drop in Analyst Sentiment on Adobe

Regarding Salesforce, Morgan Stanley’s Elizabeth Porter wrote that key performance indicators for its Agentforce AI product “have not yet caused a turning point in organic growth, as the drag from the legacy business portfolio remains.”

Morgan Stanley also downgraded several other companies in the software sector, including: Workday Inc., Intuit Inc., JFrog Ltd., Elastic NV, PagerDuty Inc., Rapid7 Inc., SPS Commerce Inc., BlackLine Inc., and Vertex Inc. However, the bank upgraded cybersecurity software company Fortinet Inc. to an “equal-weight” rating, citing its “solid near-term performance patterns.”

As a widely followed benchmark for the sector, the iShares Expanded Tech-Software Sector ETF fell 1% on Tuesday, widening its cumulative decline this year to 13%. Adobe fell 3.7%, with a year-to-date drop of more than 35%. Salesforce slipped 1.6%, with a 36% cumulative decline in 2026.