Industrial Software Valuations Drop 50% as Coding Costs Account for Only 4–8% of Revenue
Barclays analyst Guy Hardwick estimates coding costs represent only 4–8% of mature SaaS revenues and argues AI-driven code commoditization poses limited direct risk to industrial software stocks. Valuations for covered names have plunged roughly 50% over the past six months, while inference and infrastructure expenses support a valuation floor.
1. Analyst Perspective on AI Impact
Barclays analyst Guy Hardwick contends that the recent sell-off in industrial software names overestimates the threat from generative AI, emphasizing that customers pay primarily for services, domain expertise and operational reliability rather than raw code.
2. Limited Revenue Exposure to Coding Costs
Hardwick notes coding expenses account for approximately 4–8% of revenues at mature SaaS firms, meaning automation of code generation would have minimal direct financial impact on overall economics.
3. Sharp Valuation Declines Observed
Under Barclays coverage, multiples for industrial software companies have slid about 50% in the last six months, with Manhattan Associates shares down over 40% from their 2025 peak.
4. Operating Economics Create Valuation Floor
While generative AI may lower software development costs, ongoing GPU, energy and infrastructure expenses for inference impose a hard price floor that benefits established industrial software vendors.