SKN | Morgan Stanley Reassesses Five9 as AI Risk Narrative Softens for SaaS

Key Takeaways

• Morgan Stanley trimmed its Five9 price target but sees AI disruption risks to SaaS as less severe than feared, improving the sector’s 2026 setup.

• Barclays remains constructive on Five9 with an Overweight rating, arguing valuations are depressed despite stable IT spending.

• For investors, the focus shifts from AI displacement fears to demand visibility and corporate spending discipline.

Five9 has returned to analyst focus as sentiment around AI disruption in the SaaS sector begins to moderate. In a January update, Morgan Stanley lowered its price target on Five9 to $26 from $30 while maintaining an Equal Weight rating, reflecting tempered near-term expectations but a less hostile long-term outlook for the group.

Morgan Stanley: Valuation Reset, Not a Structural Break

Morgan Stanley noted that SaaS stocks underperformed broader software and technology peers in 2025, largely due to concerns that generative AI could commoditize application-layer software. However, the firm now sees growing evidence that these risks may be overstated, particularly for platforms embedded deeply into enterprise workflows such as customer experience and contact center solutions.

Despite this improved backdrop, Morgan Stanley remains cautious. The firm pointed to limited evidence of broad-based upward revisions in corporate IT budgets, keeping its stance selectively opportunistic rather than outright bullish.

Barclays: Sector Out of Favor, Setup Improving

In a separate January note, Barclays lowered its price target on Five9 to $25 from $29 but retained an Overweight rating. The adjustment came as part of a wider reassessment of the software sector heading into 2026.

Barclays highlighted stable macro conditions, resilient IT spending, and compressed valuations as supportive factors. From this perspective, Five9’s positioning within cloud-based contact center infrastructure leaves it exposed to AI innovation, but not necessarily displaced by it—especially as enterprises prioritize productivity gains over wholesale platform replacement.

What This Means for Five9

Five9 operates at the intersection of SaaS and applied AI, providing cloud-based contact center software that increasingly integrates automation, analytics, and AI-driven routing. As fears of AI-driven obsolescence ease, the investment debate shifts toward execution: customer retention, monetization of AI features, and the pace of enterprise spending recovery.

The split between cautious price targets and constructive ratings reflects a market still recalibrating expectations rather than abandoning the SaaS model altogether.

Outlook

For 2026, Five9 sits in a sector that remains out of favor but potentially mispriced if AI proves to be an enabler rather than a destroyer of SaaS economics. Analysts appear less concerned about existential risk and more focused on demand visibility and margin discipline.

For a confidential discussion on how AI adoption, SaaS valuation resets, and enterprise software exposure can be assessed within a global technology allocation, contact our senior advisory team.