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Investing.com -- Morgan Stanley analysts told investors in a note Monday that spending on front office software is poised to accelerate in 2025, supported by waning cyclical headwinds and growing enterprise interest in generative AI.
“Overall software budgets remained stable, though front office spending intentions ticked up in our 2Q25 CIO Survey,” Morgan Stanley (NYSE:MS) wrote. “Waning cyclical headwinds and the early ramp-up of secular cycle in Gen AI could improve positioning.”
Surveyed CIOs reportedly indicated a clear preference for front office software, with 52% expecting to increase spending in 2025 versus just 7% expecting cuts, a “7.5x Up-to-Down ratio,” according to Morgan Stanley.
By comparison, back office software spending shows a 3.3x revision ratio, with 51% forecasting increases but 15% planning reductions.
On average, the bank said CIOs expect front office SaaS spending to grow 4.7% year over year in 2025, versus 3.9% for back office.
That is said to mark a significant shift: “Front office SaaS spending intentions have historically trailed back office spending intentions by a wide margin (around 100-250 bps),” they wrote.
Morgan Stanley views this as an inflection point. “The inflection in growth expectations observed for 2025 (+160 bps from 2Q24) builds confidence in having largely worked through this digestion period,” the firm said, referring to the post-Covid spend optimization that weighed on front office budgets.
The bank reiterated Overweight ratings on Salesforce (NYSE:CRM) and HubSpot (NYSE:HUBS), citing “constructive CIO survey data (CRM) / positive channel checks (HUBS) against undemanding valuation.”