The prevailing sentiment toward enterprise software stocks in 2026 has been broadly negative, built on the fear that large language models will replicate the functionality of expensive, deeply embedded Business platforms at a fraction of the cost and with far less customisation friction.
That argument has weighed on valuations across the sector, producing what Bank of America analyst Frederic Boulan described this week as an irrational pricing of SAP shares, specifically, the market treating the German software giant as though it will suffer a growth shock that the fundamentals do not support.
In a note published Tuesday ahead of SAP’s Q1 results, Boulan reiterated the bank’s buy rating with a $308 price target, representing 60.7% upside from Monday’s close. The thesis is essentially that SAP’s competitive position is structurally different from the generic software companies that are most vulnerable to AI disruption, and that the market has been pricing it as though those differences do not exist. “Software companies are not equal in front of AI risks,” Boulan wrote.
“Deep domain expertise and business integration are hard for new entrants to replicate, making complex, mission-critical platforms like SAP less vulnerable as they embed GenAI using proprietary customer data.”
The core of the argument is about proprietary data. General-purpose AI models, however capable, do not have access to the decades of enterprise-specific financial, logistics, procurement and workforce data that SAP’s systems hold for its customers. The value of SAP’s platform is not the software itself but the operational history embedded within it, and that is not something a startup or a hyperscaler building commodity AI tools can replicate quickly. “Although we believe some segments of the Tech ecosystem are bound to be profoundly impacted by Gen AI, we see current levels as attractive for stocks like Buy-rated SAP with strong moats and potential AI upside,” Boulan added.
The broader context for the note is a software sector sell-off that has taken the group down significantly from its late-2025 highs. Several software indices are down more than 20% year-to-date as investors have rotated away from companies whose revenue models seem most exposed to the AI disruption scenario. SAP has been caught in that rotation despite operating a fundamentally different kind of business from pure-play SaaS companies selling point solutions into commodity markets.
SAP’s own 2025 full-year results supported the defensive case. Cloud revenue guidance for fiscal 2025 indicated growth to €21.6 billion to €21.9 billion, a year-over-year increase of 26% to 28% in constant currency, while non-IFRS operating profit guidance pointed to €10.3 billion to €10.6 billion. Cloud backlog growth was 25% in Q4 2025, the company’s ninth consecutive quarter of backlog expansion, and free cash flow came in toward the top of its guided range.
On Tuesday, Bank of America acknowledged the near-term headwind explicitly. “Although we do expect the current geopolitical uncertainty to modestly impact Q1 bookings, results should illustrate SAP’s defensive business profile, with top line to accelerate to 11.5% driving 15% EBIT growth,” Boulan wrote in his investor note. That framing is careful: a modest Q1 bookings dip is acknowledged, but the structural revenue and profit drivers are expected to hold regardless of what the geopolitical noise does to short-term enterprise decision-making.
SAP is traded on the New York Stock Exchange as well as in Frankfurt, which means it is accessible to US investors through the same exchange infrastructure as domestic large-caps. The company is headquartered in Walldorf, Germany, and it is one of a handful of European technology companies with genuinely global scale and pricing power. Its customer retention rates are among the highest in enterprise software, largely because migrating off SAP ERP systems is an extraordinarily costly and disruptive process that most companies undertake at most once per decade.
The risk to the thesis is that the AI disruption hypothesis, even if it takes longer to materialise than the market currently prices, eventually does materialise in some form and compresses the premium SAP has historically commanded for its mission-critical positioning. Boulan’s counter to that risk is that SAP’s own AI integration, which is being built on top of proprietary customer data rather than generic training sets, could actually widen its competitive moat rather than narrow it. “Assuming no changes to our current 2026-2030 forecasts,” the analyst added, the stock is currently priced below intrinsic value by a margin that requires an implausibly pessimistic scenario to justify.
The note arrives at a moment when distinguishing between software companies that are genuinely disruption-resistant and those that are merely hoping to be is becoming the most important analytical judgment in the sector. Bank of America is making a clear call, and it has put a specific price target on it rather than retreating into ambiguity.