Like many software companies, HubSpot ( HUBS ) has been at the center of debate around whether or not AI technology will completely disrupt the need for traditional software vendors. There has been a complete meltdownAnalyst’s Disclosure: I/we have no stock, option or similar derivative position in any of the companies mentioned, and no plans to initiate any such positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other t ...

Company Overview - HubSpot Inc. is a cloud-based Customer Relationship Management (CRM) platform headquartered in Cambridge, MA, primarily serving small-to-medium-sized businesses (SMBs) [1] - The HubSpot Growth platform integrates three main verticals: Marketing Hub, Sales Hub, and Service Hub, each offering distinct capabilities [1][2] Industry Performance - The software industry has seen a significant decline in performance recently, with many leading software stocks experiencing substantial drawdowns from their all-time highs [3] - Advanced AI tools are disrupting legacy software businesses, raising investor concerns about the sustainability of traditional software models [3][4] AI Impact - The emergence of AI programs threatens to undermine the legacy software subscription model, which typically charges companies per user and has historically generated high profit margins [4][5] - HubSpot is investing in AI and data center infrastructure to adapt to these changes, but faces challenges from new AI-driven competitors [4][10] Financial Performance - HubSpot's gross profit margins peaked in early 2025, indicating potential challenges ahead as AI tools gain traction [4][10] - The company's stock has declined over 20% year-to-date, reflecting relative weakness and heavy distribution in the market [8] Product Strategy - HubSpot has introduced a low-cost starter pack priced at $20 per month to attract new customers, but this could potentially cannibalize its premium product offerings [7]

20 January 2026 Mark L. Moerdler, Ph.D. +1 917 344 8506 mark.moerdler@bernsteinsg.com Global Software Global Software: Initial thoughts for 2026 and our software names Firoz Valliji, CFA +1 917 344 8316 firoz.valliji@bernsteinsg.com Shelly Tang, CFA +1 917 344 8342 shelly.tang@bernsteinsg.com It is the beginning of 2026 and the world in general and software more specifically is quite different from what we saw in early 2025. Investor focus has shifted dramatically from macro concerns to the disruptive rise ...

Summary of Global Software Conference Call Industry Overview - The software industry is experiencing a significant shift in focus from macroeconomic concerns to the disruptive rise of AI, with investor discussions centered around whether an AI bubble exists and the potential impact of AI on enterprise software [1][11][15]. Key Themes for 2026 - **Valuation Reset**: Software valuations have halved over the past year, creating opportunities for investors to acquire high-quality stocks at discounted prices [14][31]. - **IT Spending Outlook**: Recent CIO surveys indicate one of the strongest IT spending outlooks since 2018, with expectations for a stable macro environment and lower interest rates supporting demand, particularly among small and medium-sized businesses (SMBs) [3][13][23]. - **Generative AI Impact**: While Generative AI is a major topic, its actual revenue impact on software companies is still limited. Most companies are not yet seeing significant revenue from AI, and the focus is shifting towards company-specific opportunities [6][15][19]. Company Recommendations - **Buy Recommendations**: - **Oracle (ORCL)**: Strong core business with significant cloud transition and market share gains in IaaS/PaaS, driven by unique offerings [4][27]. - **Microsoft (MSFT)**: Durable business with multiple growth levers and a reset valuation, positioned well for AI monetization [4][27]. - **SAP (SAP)**: Consistent double-digit revenue growth and margin improvement, despite AI cycle noise [4][27]. - **HubSpot (HUBS)**: Attractive entry point with strong SMB market positioning and potential benefits from AI adoption [4][27]. - **Cautionary Recommendations**: - **Salesforce (CRM)**: Concerns over underperformance and potential reliance on acquisitions to drive growth [4][29]. - **Snowflake (SNOW)**: Long-term growth concerns due to market saturation and competitive pressures [4][30]. - **Workday (WDAY)**: Growth deceleration and investor skepticism regarding AI's impact on its business model [4][28]. Financial Metrics - **Valuation Comparisons**: - Adobe (ADBE): Adjusted P/E ratios have decreased significantly, with a current valuation of 12.0x for 2026E [5][32]. - Microsoft (MSFT): Current P/E at 27.5x for 2026E, reflecting a reset from previous highs [5][32]. - Oracle (ORCL): Trading at a 0.9x PEG ratio, down from 1.4x a year ago, indicating a significant valuation adjustment [32]. Macro Considerations - **Economic Environment**: The macroeconomic landscape is expected to stabilize, with potential benefits from deregulation and tax cuts in the U.S. impacting SMB spending positively [6][23]. - **AI Adoption Timeline**: Enterprise adoption of AI is anticipated to take longer than expected, with significant visibility likely not occurring until 2027 or 2028 [22][23]. Conclusion - The software sector is at a pivotal moment, with significant valuation resets providing investment opportunities. However, the actual impact of AI on revenue generation remains uncertain, necessitating a cautious approach to investment in this space. The focus should be on companies with strong fundamentals and clear growth trajectories amidst the evolving landscape of AI and macroeconomic conditions [1][14][19].

Group 1 - HubSpot, Inc. (NYSE:HUBS) is recognized as a top software application stock by hedge funds, with Raymond James maintaining an Outperform rating and a price target of $525, indicating an upside potential of nearly 60% [1] - Following a webinar with a key HubSpot partner, new deals were highlighted that are expected to finalize in Q1 2026, contributing to a strong deal pipeline for 2026, despite concerns regarding AI-related risks and growth deceleration [2] - Citi's Tyler Radke reaffirmed a Buy rating for HubSpot, raising the target price from $658 to $660, suggesting an upside of approximately 101%, and initiated a 30-day upside catalyst watch on the stock [3] Group 2 - HubSpot is a leading provider of cloud-based customer relationship management (CRM) platforms, offering various tools through its Marketing Hub, Sales Hub, Operations Hub, Service Hub, and Commerce Hub, serving clients globally across the Americas, Asia Pacific, and Europe [4]

Group 1 - HubSpot, Inc. is identified as one of the 15 software stocks with the highest upside potential, with a current price target of $600 from Wells Fargo, indicating a 73% upside from current levels [1] - Barclays has also maintained a Buy rating on HubSpot, but has lowered its price target from $575 to $525, suggesting a 50% upside from current levels [2] - Analysts believe that the favorable environment for software stocks, stable macroeconomic conditions, and low stock valuations create an attractive opportunity for long-term investors [3] Group 2 - HubSpot operates as a cloud-based customer relationship management (CRM) platform provider, offering services across Europe, the Americas, and the Asia Pacific [4]

Core Insights - Whales have shown a bullish stance on HubSpot, with 46% of trades being bullish and 46% bearish, indicating a balanced sentiment among large investors [1] - The projected price targets for HubSpot range from $250.0 to $570.0 over the last three months, reflecting significant investor interest [2] - Recent trading volume for HubSpot is 569,650, with the stock price down by 4.43% to $314.65, suggesting potential oversold conditions [11] Options Trading Analysis - A total of 13 options trades were detected for HubSpot, with 8 puts totaling $798,538 and 5 calls totaling $500,380 [1] - The largest observed options trades include a bearish put trade for $466.5K at a strike price of $250.00 and a bullish call sweep for $333.0K at a strike price of $300.00 [7] - Volume and open interest trends indicate liquidity and investor interest in HubSpot's options, particularly within the strike price range of $250.0 to $570.0 over the past 30 days [3] Company Overview - HubSpot is a cloud-based marketing, sales, and customer service software platform, founded in 2006 and headquartered in Cambridge, Massachusetts [8] - The company has expanded its focus from inbound marketing to a broader range of marketing, sales, and service solutions [8] Analyst Insights - Industry analysts have proposed an average target price of $551.0 for HubSpot, with Barclays and Morgan Stanley maintaining Overweight ratings and target prices of $525 and $577, respectively [9][11]

Summary of Conference Call Notes Industry Overview - **Industry**: Application Software, specifically focusing on Software as a Service (SaaS) in North America - **2025 Performance**: Application SaaS underperformed due to muted revenue growth, limited upward estimate revisions, and multiple compression driven by AI-related concerns. The valuation discount on application SaaS relative to broader software increased to approximately 37% from 20% a year ago [3][7][21]. Key Insights - **AI Concerns**: Peak AI fears were noted in 2025, leading to a shift in investor sentiment. Companies emphasized competitive advantages such as proprietary data and large installed bases but struggled to improve investor confidence [3][23]. - **Bull Case for 2026**: The bull case hinges on application software becoming the primary delivery mechanism for AI capabilities, potentially expanding the total addressable market and improving growth trajectories. However, the lack of clear growth inflection in 2025 left many vendors perceived as disrupted by AI [3][23][35]. - **CIO Survey Insights**: A survey indicated that 19% of CIOs operationalizing AI/ML technologies view application vendors as primary partners, an increase from 13% in the previous quarter. This suggests a shift in perception towards application software as a vehicle for AI functionalities [26][29]. Investment Recommendations - **Selective Approach**: A selective investment strategy is recommended, favoring companies with strong positioning in the "AI Success Framework" and idiosyncratic growth stories. Preferred companies include HUBS, KVYO, WIX, AMPL, BL, DSGX, and NAVN [2][7][52]. - **Price Target Adjustments**: Price targets for several companies were updated, reflecting changes in growth outlooks and market conditions. For example, HUBS was adjusted to $577, while KVYO was set at $42 [5][54]. Risks and Considerations - **AI Risks**: The report outlines three core areas of AI-related risks: DIY risk, start-up risk, and seat-based model risk. Evidence suggests that fears regarding these risks may be overstated, but ongoing monitoring is necessary [24][26][27]. - **Cyclical Headwinds**: The optimization cycle that began in 2022 is largely digested, with stabilization in key performance indicators like ARR and billings growth. However, broad-based positive spending revisions remain absent, necessitating a cautious approach [35][36]. - **2026 Spending Growth**: Software is expected to see modest growth in spending, projected at 3.8%, compared to declines in hardware and communications sectors. This indicates a relatively healthier positioning for software in IT spending plans [43][44]. Conclusion - **Outlook for 2026**: The outlook for application SaaS in 2026 is cautiously optimistic, with potential for improved sentiment as AI risks are reassessed and growth trajectories begin to stabilize. However, the absence of broad-based positive revisions in spending necessitates a selective investment approach [2][35][52].

Group 1 - The software sector is facing concerns about potential disruptions from generative AI, impacting companies like HubSpot (HUBS) which has seen its premium valuation diminish significantly [1] - HubSpot, once a growth favorite, continues to operate amidst market volatility, indicating resilience despite changing market dynamics [1] - The investment strategy focuses on identifying undervalued companies with strong fundamentals and long-term growth potential, emphasizing the importance of management quality and balance sheet strength [1] Group 2 - The investment group led by Julian Lin provides exclusive access to high-conviction stock picks, comprehensive research reports, and real-time market analysis, aimed at delivering superior returns compared to the S&P 500 [1]

Group 1 - The software sector is facing concerns about potential disruptions from generative AI, impacting companies like HubSpot (HUBS) which has seen its premium valuation diminish significantly [1] - HubSpot, once a growth favorite, continues to operate amidst market volatility, indicating resilience despite challenges [1] - The investment strategy focuses on identifying undervalued companies with strong fundamentals and long-term growth potential, emphasizing the importance of management quality and balance sheet strength [1] Group 2 - The investment group led by Julian Lin provides exclusive access to high-conviction stock picks, comprehensive research reports, and real-time market analysis, aimed at delivering superior returns compared to the S&P 500 [1]