Market Watch: The Great SaaS Repricing — Salesforce, Adobe, and ServiceNow Have Lost $290 Billion in Market Value While Generating Record Free Cash Flow
Something remarkable is happening in enterprise software. Three of the sector's most dominant franchises — Salesforce (CRM), Adobe (ADBE), and ServiceNow (NOW) — have collectively shed roughly $290 billion in market capitalisation from their 52-week highs, with drawdowns ranging from 36% to 49%. Yet their underlying businesses have never been stronger: Salesforce just posted $11.2 billion in quarterly revenue with 77.6% gross margins, Adobe is printing 30% net income margins on $6.2 billion in quarterly sales, and ServiceNow crossed $3.5 billion in quarterly revenue for the first time. The disconnect between operational execution and stock performance represents one of the most significant sector-wide re-ratings in recent memory. With the Federal Reserve having cut rates three times since September 2025 — bringing the fed funds rate to 3.64% — the traditional playbook of 'rate cuts lift growth stocks' has been turned on its head. Instead, the market is repricing enterprise SaaS around a single question: does artificial intelligence strengthen or undermine the moats that have made these businesses cash flow machines? For investors watching from the sidelines, the numbers are striking. Salesforce now trades at a 7.8% free cash flow yield, Adobe at 8.8%, and ServiceNow at 4.1%. These are valuations not seen in years for businesses of this quality — but whether they represent generational buying opportunities or fair compensation for structural disruption risk depends entirely on how the AI story plays out.