Rising AI, Analytics Budgets Could Lift Microsoft, Snowflake, Datadog

BofA Securities analyst Brad Sills disclosed its software spending survey on Tuesday.

Since his last survey in December, Sills’ IT professionals’ survey suggested that software spending growth intentions have come down a bit for the second half of 2025 and 2026. Software spending is expected to grow +9.9% for 2025, down 100 basis points from his December survey, and +10.8% for 2026, down 40 basis points. He said this aligns with management and channel commentary that changing macro policies are muddling the demand environment.

However, Sills’ survey still suggests an improving backdrop in 2026, which is backed by channel feedback that pipelines for new software projects remain healthy.

The analyst noted that Data Analytics regained the top spot as a spending priority, trading places with Cloud Communications and Videoconferencing, which slipped to second place. Security held the third position, he said. Sills said other categories with notably higher spending expectations include observability and financials/ERP.

Sills noted that the lower-scoring categories were front-office applications such as CRM Sales, Marketing, and Support. He suggested that this could be due to firms evaluating AI priorities for front-office application projects.

For Analytics, Security, and Public Cloud, Sills noted the positive data supports his thesis for Microsoft Corp MSFT, Snowflake Inc SNOW, and Datadog Inc DDOG, which are well positioned in these categories.

The analyst said Infrastructure and Back Office were the top software categories for AI investment (across Infrastructure, Back Office, Front Office, and Desktop Applications).

Back Office saw the largest increase since his year-end fiscal 2024 survey, he said. After LLMs, Workday Inc WDAY was the most selected, Sills noted.

The analyst noted that after LLMs, Salesforce Inc CRM registered the highest number of front-office vendors in which respondents plan to invest in AI offerings.

Front office apps scored lower for the second consecutive survey, Sills noted.

The lower result reflects that firms remain in the discovery phase, as pricing models for agentic offerings such as Salesforce’s Agentforce and HubSpot Inc‘s HUBS Breeze AI agents are evolving, per the analyst.

Sills noted that Amazon.Com Inc AMZN AWS, Microsoft, and Alphabet Inc‘s GOOG GOOGL Google were the most frequently selected vendors for AI in infrastructure.

The analyst said Adobe Inc ADBE remains the market leader in AI investments in desktop applications.

Hiring expectations are down for 2025, again, Sills noted, and recession expectations are fairly high. DOGE is impacting spending plans more so than tariffs, leading to a lower weighted average spending as per the survey.

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