Guggenheim upgraded two of the most widely held enterprise software stocks to Buy on the same morning, and both jumped on the call.
Two upgrades, one theme
Salesforce is trading up around 5% near $165, and ServiceNow is up roughly 6% near $106. Both moves came after Guggenheim lifted its rating on each stock from Neutral to Buy before the open.
Guggenheim put a $228 target on Salesforce and a $125 target on ServiceNow. Analyst John DiFucci framed the ServiceNow call plainly, saying current levels offer an attractive entry into a comfortably profitable business that should keep growing at a double-digit rate.
The firm was careful not to oversell it. Guggenheim said AI monetization is unlikely to show up in results soon and that the risks around it are real. The upgrade is a valuation argument, not a claim that the fear driving these stocks down was wrong.
Why the stocks got this cheap
Enterprise software has been one of the worst places to hide in 2026. Investors have worried that AI agents will let companies do more with fewer software seats, and that the subscription model that made these firms great could shrink.
The selling was severe. Salesforce came into today down about 40% from its 52-week high near $277. ServiceNow was down roughly 50% from its high near $211. That is the kind of drop usually reserved for companies with broken businesses, not ones still growing and generating cash.
The fundamentals do not look broken. Salesforce trades around 19 times trailing earnings, carries a net margin near 19%, and converts a large share of revenue into free cash flow, which is why it changes hands at only about 9 times free cash flow. It even pays a small dividend now. ServiceNow is pricier at roughly 62 times trailing earnings, but it holds a gross margin above 76% and almost no net debt. Both are profitable, and both still grow.
The read for investors
The bull case here is simple. If AI does not gut software demand as fast as the market feared, these are healthy companies trading at prices that assume the worst. Guggenheim is betting the panic overshot.
The bear case has not disappeared. The same firm making the call warned that AI monetization is still a promise, not a line on the income statement. And the software wound has been broad. Adobe is up about 4% today too, but it sits near 10 times forward earnings after its own steep fall, a sign investors still doubt the group.
The next test is earnings. Guidance, seat growth, and any hard number on what AI is adding or taking away will matter more than any single rating change. For now, a rare double upgrade gave a hated corner of the market its best day in a while.
