Is the AI New Contract Incremental or Substitution? This Week's Salesforce and Snowflake Earnings Reports Will Reveal

Following the long weekend holiday in the United States, the most controversial issue in the technology industry is back on the table: Is AI providing warmth to established enterprise software companies, or is it quietly undermining them?

This week, Salesforce, Snowflake, and Asana will successively release their financial results for the new quarter, providing new ammunition for this debate.

Executives' Optimistic Narrative May Not Cover Up Embarrassing Numbers

Last Thursday, Workday, a veteran in human resources software, took the lead in submitting its report. After the financial results were announced, Co-founder and CEO Aneel Bhusri boldly claimed: "With AI, we have essentially become a startup company again." This statement won the applause of investors, and the stock price rose that day.

However, the numbers tell a different story. Workday's revenue for the quarter increased by 13.5% year-on-year, slowing down by one percentage point from the previous quarter, and the guidance for subscription revenue growth also slightly declined. What is more thought-provoking is that Workday's announced AI Agent annualized revenue has reached $500 million, but this revenue did not push up the overall revenue growth rate - this means that the new revenue brought by AI is likely to be encroaching on the existing business of other departments, rather than forming an increase.

The financial report released by video conferencing software Zoom on the same day conveyed a similar signal: the growth rate has picked up slightly, but the increase is still lukewarm. The data from both companies did not show the "SaaS Armageddon" impact that people are worried about, but it's not exciting either.

Customers are Voting with Their Feet: Contracts are Getting Shorter

Beyond the numbers, the behavioral changes of corporate customers may be more worth paying attention to.

An increasing number of companies are actively requesting shorter contract terms with software suppliers, shifting from the previous common five-year long-term contracts to one-to-three-year short-term arrangements. The logic behind this is straightforward and realistic: AI technology is evolving too fast, and no one can guarantee that today's suppliers will still be the best solution next year; customers need the flexibility to switch at any time. Some companies have even included "exit clauses" in their contracts - if the supplier's AI capabilities fail to meet the standards within the agreed time, customers have the right to terminate the contract in advance.

This trend has a structural impact on the traditional SaaS business model. Long-term contracts lock in not only revenue but also customer stickiness and renewal certainty. Once the contract terms are systematically shortened, the visibility of revenue across the entire industry will decrease.

The Three Exam Papers This Week

The market's expectations for the performance of the three companies this week are as follows:

Salesforce is expected to have a revenue of $11.1 billion, a year-on-year increase of 12.5%, earnings per share of $1.76, a year-on-year increase of 9.3%; Snowflake is expected to have a revenue of $1.323 billion, a year-on-year increase of 27%; Asana is expected to have a revenue of $203 million, a year-on-year increase of 8.4%.

It can be anticipated that the executives of the three companies will vigorously publicize the positive progress of AI transformation on the earnings call - this has almost become a standard move for technology companies during the earnings season. The real point of interest lies in whether AI-related revenues are creating new increments, or merely replacing existing sources of revenue internally; and in the face of pressure from customers to shorten contract cycles, how will the management respond and deal with it.