U.S. Software: The Q2 On-Cycle Earnings Guide – Too Early to Get Excited

Research evidence excerpt

U.S. Software: The Q2 On-Cycle Earnings Guide – Too Early to Get Excited

Equity Research

21 July 2026

U.S. Software

The Q2 On-Cycle Earnings Guide –

Too Early to Get Excited

We see Q2 earnings as a continuation of trends we saw in Q1. U.S. Software

It is too early for the SaaS names (NOW, HUBS etc.) to show POSITIVE Unchanged

significant AI upside, which means there can't be a major U.S. Software

Raimo Lenschow, CFAreversal here yet. Infra names like DDOG will show ongoing

momentum. We like MSFT here. +1raimo.lenschow@barclays.com212 526 2712

BCI, US

Raimo's Read on Q2: We expect another volatile earnings season in software. Overall spending Sheldon McMeans

trends are steady but there is the risk of a crowding-out effect, which was apparent by the +1 212 526 1544

recent IBM profit warning. However, that seemed more capex than opex related. The bigger sheldon.mcmeans@barclays.com

issue is that we are still in the early innings on the AI monetization side for many of our names. BCI, US

This means the core issue for our space still exists – how do you prove AI success when overall Eamon Coughlin

numbers are not moving higher. We expect steady numbers for SaaS names like NOW or HUBS +1 212 526 6142

but that is likely not enough to change the sentiment on these names as the AI part is still too eamon.coughlin@barclays.com

small to trigger major estimate increases. Investors want to see acceleration stories (see SNOW BCI, US

last quarter). Here, we think DDOG remains well-positioned as the growing AI momentum drives Becky Sun

the need for more DDOG observability (and hence higher estimates). Microsoft could also show +1 212 526 0416

a small acceleration in Azure growth and might get revisited again. Lastly, we believe the payroll yuyao.sun@barclays.com