AI impact on the software sector Analyst: The financial reports of these two companies may be a "tranquilizer"

As the new year enters just one month, the tension in the software sector has quickly heated up. Under the wave of artificial intelligence, the market is concerned that AI tools will erode the market share of traditional software companies, especially in the fields of project management and workflow management, which are seen as one of the most likely "disrupted" tracks by Wall Street. However, analysts believe that Atlassian (TEAM.US) and Monday.com (MNDY.US) may not be the "victims" under the threat of AI, but may instead become winners. Both companies will announce their financial reports in the coming days, with Atlassian releasing its second-quarter performance after the close of the US stock market on Thursday, and Monday.com revealing its fourth-quarter data before the opening of the market next Monday. Cantor analyst Thomas Blakey expects that the performance of both companies is expected to alleviate concerns in the market about the impact of AI. Over the past 12 months, due to increasing investor anxiety about the risks of AI substitution, both Atlassian and Monday.com have seen their stock prices fall by more than 60% cumulatively. The market is concerned that AI-driven new development models and automation tools may weaken the demand for project management software. But Blakey pointed out that both companies have confidence in the integration of their products with AI, especially in integrating with Claude, a model under Anthropic, which is one of the core AI platforms that has caused industry anxiety. Blakey predicts that Atlassian's cloud business revenue will achieve 22.5% growth this quarter, while its EBIT margin can reach 24.5%. He stated that Atlassian remains a "sustainable profit growth software company," benefiting from the accelerated penetration of AI in project management and software development scenarios. "There is currently no sign that the 'death of Jira' is happening," Blakey wrote in the report, referring to the fact that the impact of so-called "vibe coding" has not truly threatened Atlassian's core product. Jira is one of Atlassian's most well-known tools, widely used for internal work order management and service request tracking in enterprises. Despite optimism about the company's long-term development, Blakey also acknowledged valuation pressure. He maintained a "buy" rating on Atlassian but lowered the target price from $240 to $146, citing a significant contraction in valuation multiples. The new target price corresponds to a market-to-sales ratio of 4.5 times the expected revenue in 2027, while the historical average is about 7.5 times. For Monday.com, Blakey expects revenue growth of about 23% this quarter, with an EBIT margin of about 11.1%. However, the company faces more specific short-term challenges, as its website traffic has declined due to adjustments in the search algorithm by Alphabet Inc. Class C (GOOG.US, GOOGL.US), requiring the company to increase marketing and sales investments. Nevertheless, Blakey believes that the market's punishment for Monday.com is "too harsh," especially considering the company's continued revenue growth of around 20% and the adjusted market strategy. He pointed out that Monday.com is positioning itself as a "neutral platform for AI applications," not forcefully tying itself to a single AI capability, but offering open integration. "If customers want to use Monday.com's AI capabilities, they use Monday.com; if customers wish to use AI tools from other vendors, Monday.com will also choose to connect and integrate." Similar to Atlassian, Blakey maintains a "buy" rating on Monday.com but lowered the target price from $215 to $148. The new valuation is based on an enterprise value multiple of 3.5 times the expected revenue in 2027, far below the average level of about 9 times in the past three years.