2 of our software stocks face major tests of whether their rallies are for real

Here is a story making headlines in the economy: Both sides of the enterprise software trade will be tested on Wednesday evening when Club holdings CrowdStrike and Salesforce report earnings. Crushed by AI disruption concerns last year and into 2026, the comeback in cybersecurity came first, with traditional software-as-a-service stocks finally showing signs of life this summer. The market has clearly come around to the idea that the artificial intelligence boom will supercharge cybersecurity, not displace it.

CrowdStrike hit a 52-week low of around $86 each on Feb. Jim Cramer never thought cyber should trade with software-as-a-service (SaaS). He was proven correct.

Economic Details

Since its recent lows, CrowdStrike shares have more than doubled to all-time highs earlier this month before coming off the boil. Year to date, CrowdStrike is up more than 55%. Jim saw a stronger argument to be worried about AI's impact on SaaS, with client companies able to do more with fewer employees, hurting the industry's seat-based licensing model; not to mention possibly using AI to build the very software tools they pay for.

While Salesforce has become one of our smallest positions, Jim has kept it on the books to give CEO Marc Benioff the benefit of the doubt based on past success. After hitting a 52-week low of $146 on June 22, Salesforce gained 40% over the past nine weeks. A remarkable rally in a vacuum, but shares are still down 22% year to date and more than 30% off all-time highs seen back in late December, highlighting just how bad software outside of cyber has been.

The questions we are looking to answer Wednesday evening, or at least start to answer: Has cyber run too far too fast? And, can Salesforce finally put to bed the so-called SaaSpocalypse narrative once and for all? CRWD YTD mountain CrowdStrike YTD While we have no concerns regarding cyber demand, we did book some profits earlier this month in both CrowdStrike and Palo Alto Networks , our other cybersecurity name.

Analyst Views

Last earnings season, CrowdStrike CEO George Kurtz said AI is driving demand for security solutions because clients need to secure the AI before they can even deploy it. He added that clients keep telling him: "We want to go faster in our business" with AI. On the evening of June 3, the company reported better-than-expected quarterly results and better-than-expected forward guidance.

Hot money at the time sold the stock the next day, looking for more growth. Since then, shares were able to surge to new highs. But recently, the stock is testing its post-earnings declines.

As we consider CrowdStrike's Wednesday numbers, we wanted to point out what Palo Alto Networks CEO Nikesh Arora said about the industry's business cycle last earnings season. "I wouldn't get ahead of my skis and start throwing the kitchen sink at numbers for cybersecurity companies because there is still a process, a mechanism, a cycle that people buy in and there's execution and deployment. So, to the extent that do I see good demand?

Economists are analysing what the news means for the markets.