Salesforce Strength, Workday Slowdown Send Mixed Signals for European Software, BofA Says

Recent earnings from major U.S. Software-as-a-Service (SaaS) companies are providing mixed signals for the European software sector, according to a new analysis from Bank of America. The report highlights a divergence between strong enterprise demand seen at Salesforce and a more cautious growth outlook from Workday, creating an uncertain backdrop for European peers following their own solid second-quarter performance.

Salesforce Signals Robust Demand

Salesforce (CRM) delivered results that suggest enterprise software spending remains resilient, BofA noted. The company's performance and outlook were well-received by the market, with its shares jumping significantly after the report.

Key metrics from Salesforce's report include:

• Current Remaining Performance Obligation (cRPO), a key indicator of future revenue, grew 14% in constant currency, surpassing the consensus estimate of 13%.
• Management guided for a similar cRPO growth rate in the third quarter and maintained its outlook for a stronger second half.
• The company also modestly raised its forward revenue guidance.

According to Bank of America, these results help support expectations for healthy enterprise software demand trends toward the end of the year, easing some market concerns about competition and disintermediation from artificial intelligence.

Workday Points to Moderating Growth

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In contrast, Workday's (WDAY) latest earnings pointed to a decelerating growth trajectory. The company's subscription backlog, a measure of contracted future business, came in below consensus expectations and showed a marked slowdown from the previous year.

Highlights from Workday's report include:

• Subscription backlog growth slowed to 8% year-over-year, down sharply from 17.6% a year earlier.
• 12-month subscription backlog growth decelerated to 14.2% from 16.4%, with management projecting a further slowdown.
• Initial guidance for the next fiscal year points to 11% subscription growth, which management presented as a baseline with potential upside from AI adoption.

Despite the growth moderation, BofA analysts noted that Workday guided for 2 percentage points of margin expansion next year and expressed strong enthusiasm for the traction of its AI products.

Implications for European Markets

The conflicting data points from these two U.S. software giants present a complex picture for investors in European software companies. While the Salesforce results indicate that demand from large enterprises is holding up, Workday's slowing growth and cautious guidance suggest that some areas of the market may be facing headwinds. This U.S. read-through will be a key factor for markets as they assess the outlook for the European sector.