Key insights
- Barclays argues the AI threat to industrial SaaS is overblown, presenting an opportunity in undervalued stocks like Manhattan Associates and Trimble. Industrial software valuations are at historical lows relative to the S&P 500. The firm believes that enterprises value service and domain expertise, not just code, making AI an incremental opportunity rather than a threat. Manhattan Associates' stock has fallen significantly despite strong earnings, presenting a buying opportunity.
Investing.com -- Industrial software valuations have retreated to COVID-19 levels on an absolute enterprise value-to-sales basis, and relative to the S&P 500 they are at historical lows.
According to Barclays analysts, the artificial intelligence threat to software-as-a-service companies has been misunderstood and overblown.
The firm argues that AI is an incremental opportunity for industrial software names rather than a threat, as enterprises pay for service and domain expertise, not just code. Industrial software free cash flow yields of 5% now compare favorably to 3.5% for industrial technology hardware names.
Manhattan Associates
Manhattan Associates argues that the "Death of SaaS" narrative is false and based on the incorrect belief that enterprise software value lies solely in coding.
While AI can generate code at near-zero cost, software solutions still require architects who understand the blueprint, provide customer support during server outages, assume liability in data leaks, and understand regulatory changes.
Barclays notes that actual coding represents a small slice of total SaaS company spending, with AI’s direct impact on the profit and loss statement limited to roughly 6% of revenues at the midpoint of assumptions.
Despite this limited risk, Manhattan Associates’ stock price has fallen more than 40% from its 2025 peak. Valuation multiples have declined to the lowest levels since 2023 on an enterprise value-to-sales basis, with the company now trading below the negative one standard deviation bound for both enterprise value-to-EBITDA and free cash flow yield.
Manhattan Associates reported fourth-quarter 2025 results that surpassed analyst expectations for both earnings per share and revenue. The company also announced an increase in its share repurchase authority to $500 million, and William Blair reiterated its Outperform rating on the stock.
Trimble
Barclays believes Trimble’s investment case is not fully appreciated by investors as the company continues transforming from a hardware-centric positioning technology company into a software solutions provider.
The bank sees Trimble as one of the best-placed industrial software names to leverage agentic AI. Trading at approximately a 30% discount to building information modeling peers, Barclays expects this discount will narrow as Trimble continues to deliver or exceed financial targets.
Similar to Manhattan Associates, Trimble’s multiples have declined sharply, with enterprise value-to-sales nearing the 10-year average at 4.5 times, while both enterprise value-to-EBITDA and free cash flow yield are at or below the negative one standard deviation bound.
Trimble announced fourth-quarter 2025 earnings and revenue that exceeded analyst forecasts. Following the results, Bernstein reiterated its Outperform rating, while Oppenheimer lowered its price target but maintained an Outperform rating on the company’s shares.
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