LONDON, Feb 11 (Reuters Breakingviews) - Artificial intelligence will hurt incumbent software, data and professional services companies. But it won’t destroy them outright. At least, that’s what public-market investors seem to think, based on a Breakingviews analysis comparing slumping valuations with analysts’ near-term forecasts. It suggests a bleak future for the hardest-hit companies: if a zombie-like future beckons, it would make more sense to slash investment and rip out costs rather than spend hopelessly to fight the incoming tide.

The BVP Nasdaq Emerging Cloud Index (.EMCLOUD), opens new tab, a benchmark of software stocks, is down 20% so far this year. The big fear is that chatbots like Anthropic-developed Claude could serve as flexible alternatives to incumbents’ products, covering everything from expense management to online-booking forms. Data groups, professional-services firms and consultancies have been caught up in the panic, too, including London-listed RELX (REL.L), opens new tab and Thomson Reuters (TRI.TO), opens new tab, which owns Breakingviews. Shares in those two companies are down roughly a third since the end of 2025.

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It’s possible to divine just how grim investors think the situation will be. The trick is to calculate a company’s so-called terminal value from its current stock price, essentially the worth today of a firm’s future earnings in perpetuity.

This is the final step of a standard discounted cash flow analysis, which typically begins by adding up all the money a company will throw off over a certain period, often three to five years. Any additional value from there can be determined by setting a long-term growth assumption against a discount rate. Taken together, this produces a reasonable estimate of a company’s value. Running the whole calculation backwards, starting with a current market valuation and working from there, can instead reveal the growth expectations embedded in a share price.

Take ServiceNow (NOW.N), opens new tab, whose software helps big companies manage IT and human-resources processes. It had a $105 billion enterprise value on Tuesday according to Visible Alpha, while analysts expect its free cash flow to rise from $5.8 billion this calendar year to $10.3 billion in 2029. Discount each annual forecast at a 10% rate, add it all together, and the implied value of those near-term flows is $27 billion.

Deduct that sum from the enterprise value, and the implication is that ServiceNow’s business from 2030 onwards is worth $78 billion today. Translated into 2030 dollars, that’s $114 billion, again using a 10% discount rate. The final question is which long-term growth rate would produce that figure. In this case, the answer is 0.9%.

That’s fairly miserable compared to the recent past. ServiceNow’s enterprise value stood at around $200 billion last year, implying a 5.7% pace of expansion using the same calculations. In other words, the AI pain trade doesn’t imply immediate armageddon. Rather, investors seem to expect eventual stasis.

The picture is similar for other companies caught in the selloff. The same 0.9% implied long-term growth number is the median for a collection of 76 stocks studied by Breakingviews, including the BVP index’s constituents, some European software firms, as well as slumping data and professional-services groups. About 60% of them will grow from 2030 onwards, the same terminal value calculation suggests, though only a third of the overall group will grow at greater than 2%, which would merely mean keeping up with inflation. Outliers like Monday.com, RingCentral (RNG.N), opens new tab and Wix.com (WIX.O), opens new tab appear to price in steep annual declines in free cash flow from 2030 onwards.

It’s a very rough analysis, which may be wrong if analysts’ models are out of date. For example, sell-side brokers may not yet have gotten around to trimming their forecasts between now and 2029, while investors may be using their own much more pessimistic numbers. Further, using a uniform 10% discount rate is problematic given the different business types. Still, the exercise at least broadly indicates what the AI pain trade says about investors’ current expectations. The key takeaway is that, with a few exceptions, AI is more likely to zombify the incumbents than kill them quickly.

If true, that raises questions about how CEOs should react. Jefferies analysts recently noted that stocks including $260 billion SAP (SAPG.DE), opens new tab have traded close to what the broker called “liquidation value.” It refers to a hypothetical scenario, imagining what a company would be worth if its management embraced terminal decline and cut all spending related to growth – like sales, marketing, and research and development – in order to extract as much cash as possible from the business. The idea would be to let some customers leave and generate 70% operating margins from those that stay – a profitability figure that private equity-owned Cloud Software Group and Software AG have managed, according to Jefferies. It’s effectively a run-down strategy for firms whose products have fallen out of favor.

None of the major data or software incumbents are following that path right now. Rightly so, since most, like ServiceNow, are still growing strongly. The feared AI disruptor products have only just launched, and may fail to gain traction.

Still, the market is sending a message that stasis beckons for many companies – and potentially even rapid shrinkage for some. If investors are already pricing firms like zombies, it’s natural to wonder whether the companies will eventually start acting like them.

Follow Liam Proud on Bluesky, opens new tab and LinkedIn, opens new tab.

Context News

• The BVP Nasdaq Emerging Cloud Index fell 20% from the start of 2026 to the end of U.S. trading on February 9.

For more insights like these, click here, opens new tab to try Breakingviews for free.

Editing by Jonathan Guilford; Production by Pranav Kiran

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Liam Proud

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Liam Proud is a Breakingviews Associate Editor, based in London. He focuses on banking, finance, private equity and deals. He joined Breakingviews in 2016 and previously covered technology, media, telecoms and the car industry.

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