Get Ready for Conservative Language and Restructurings on EPS Calls
I don’t know that we are going to see many outright misses in Softwareland as companies report March quarter results. However, I imagine that many companies will state that 2024 will be more back-end loaded, that sales pipelines are not as full with near-term deals, that sales cycles are taking longer to close. No CEO is ever going to say on an EPS call that deals are being cancelled, instead he/she will say that deals are getting pushed out.
Corporate buyers are focused on getting lean and paying down debt. Many buyers have debt maturing this year and/or in 2025 and are having to work through rolling over debt at higher rates and what that means for headcount reductions. Software purchases are not of the highest priority now. This also applies to Gen AI. NVIDIA will sell chips to LLM builders, LLM builders will continue to build, MSFT and GOOGL will continue to offer Gen AI capability, but corporate spend on Gen AI experiments is going to die out. Gen AI is very different from other AI permutations such as ML models deployed for recommendation engines, for underwriting, for predicting sales activity, for dynamic pricing and the like because those ML models have been part of companies’ day-to-day workflow for over a decade now. Gen AI is different because it is an experiment for most firms at this stage.
I imagine that a number of Technology companies will announce restructurings on the EPS calls.