AI and cloud services have already made their mark on the tech landscape, and the next iteration is taking shape: artificial intelligence software as a service, or AI SaaS. Simply put, it refers to the use of cloud technology to deliver advanced AI tools while minimizing cost and resource demands for end users.
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The cloud can already reach a wide range of customers, users who require high-end computing but can’t support the infrastructure themselves. Adding AI to the mix will put advanced functions – think machine learning and natural language processing – into the cloud’s toolbox. From a user perspective, putting AI tools into the subscription-based SaaS model will also give advantages in flexibility and scalability.
The opportunity here is substantial. According to Zion Market Research, last year, the AI SaaS market was estimated to be worth $115.22 billion – and it’s predicted to see a CAGR of 38% or more over the next decade, to reach $2.97 trillion by 2034.
Covering the AI/SaaS segment from Cantor, analyst Matthew VanVliet sees major upside in this space – and in the stocks poised to benefit.
“We believe there is ample upside for the group ahead, as AI represents a much greater catalyst than anything in the past couple of years, more significant and sustainable than pandemic-era work-from-anywhere investments. Our view is the opportunity for growth to re-accelerate points to upside for the AI winners, unlocking multiple expansion if this plays out as we are expecting,” VanVliet opined.
Building on that bullish outlook, the analyst has singled out two top picks he believes are especially well-positioned to ride this next wave of AI-driven growth – a view echoed by the broader analyst community. According to the TipRanks database, both stocks carry Strong Buy consensus ratings from the Street. Let’s take a closer look.
Klaviyo, Inc. (KVYO)
The first company we’ll look at here is Klaviyo, a software firm that brings CRM (customer relationship management) to the B2C world. The company fields a proprietary data platform with AI insights, to give its customers effective marketing automation, data analysis, and customer service. The aim here is personalized service – Klaviyo’s customers can use the company’s software packages to improve their own customers’ interactions: customer profiles, omnichannel campaigns, web forms, and more.
Klaviyo has built its operations and reputation on the quality of its data-based services – which positioned the company well to integrate AI into its offerings. The company’s email and SMS marketing services already make use of AI tech to smooth out customization and targeting, to automate content generation, and to optimize send times. Klaviyo’s clean data library is a key support for the AI services.
Strong services have allowed this company to build a solid customer base. In its last financial release, Klaviyo defined a customer as ‘a distinct paid subscription to our platform;’ by that definition, the company stated that it had over 169,000 customers as of this past March 31. Within that customer base, the number of large customers – defined as those generating more than $50,000 in annual recurring revenue (ARR) came to 3,030, up 40% year-over-year.
In addition to building a strong customer base, Klaviyo’s 1Q25 financial release also showed quarterly revenue of $279.8 million, up 33% year-over-year and $11.89 million ahead of the forecasts. The company ran a net loss in the quarter, of 5 cents per share, but that was one cent per share better than had been anticipated.
Turning to Cantor’s VanVliet, we find the analyst upbeat on Klaviyo, citing the company’s strong position and its large total addressable markets and potential for growth. He writes of the stock, “KVYO’s core ecommerce/retail SAM is ~$16b, with a clear eye to more of the market as the platform expands, uptake of its CRM increases, such that it becomes a true system of record, and AI broadens its reach. KVYO’s TAM also keeps expanding as it moves upmarket and diversifies across new industries and geographies. Within the US, it sizes the TAM at $34b and the global opportunity at $68b. At $1b+ of revenue today, KVYO’s penetration remains low, providing it a long runway of potential future growth.”
VanVliet’s comments back up his Overweight (i.e., Buy) rating here, and his $48 price target implies a potential gain of 41% for the shares in the year ahead. (To watch VanVliet’s track record, click here)
The Strong Buy consensus rating on KVYO shares is based on 18 recent Wall Street recommendations, which break down to 15 Buys and 3 Holds. The stock’s $33.95 current trading price and $43.41 average target together suggest a one-year upside of 28%. (See KVYO stock forecast)
HubSpot, Inc. (HUBS)
Next on our list of Cantor’s Top Picks is HubSpot, the well-known marketing software platform. The company has a reputation for innovation and has developed a solid stable of marketing software packages offered through a unified platform. HubSpot’s software solves problems and smooths out processes in CRM, content management, social media management, and SEO – in fact, in pretty much any area of online direct marketing, inbound sales, and customer service.
HubSpot introduced its Breeze AI toolkit last year as an AI enhancement of the company’s existing services – and as an independent set of AI-powered marketing tools. The company’s Breeze Customer Agent is billed as a ‘24/7 AI concierge,’ capable of independently automating features in marketing, sales, and service. The system is designed to act on the human operator’s instruction, with the AI agent handling the implementation. HubSpot claims that client teams using the AI agent see a 10% higher close rate on work orders, a 39% faster ticket resolution, and upwards of 50% of customer contact conversations resolved automatically – with the top users reaching 90%.
In addition to streamlining marketing outreach, HubSpot also makes AI systems available in the content field. The company’s Breeze Content Agent can scale content marketing efforts, create and publish landing pages, and generate search-optimized blog posts – and all in minutes rather than hours. The AI can even handle scripting and voiceover for video content.
In its 1Q25 financial report, HubSpot reported what it described as a ‘solid start’ to the year. The company’s customer count as of March 31 was up 19% year-over-year, a growth figure that offset a 4% decline in average subscription revenue per customer. At the top line, HubSpot reported $714.1 million in revenue, up 16% year-over-year and $13.7 million ahead of the pre-release estimates. HubSpot runs a quarterly profit, and in Q1 it realized a non-GAAP EPS of $1.84 – 8 cents better than expected. The company finished Q1 with $2.2 billion in cash and liquid assets on hand.
Checking in again with VanVliet and the Cantor view of this CRM firm, we find him impressed by HubSpot’s record of success. The analyst says of the company, “HUBS is one of the few CRM industry players that has successfully moved into adjacent sub-categories (started in Marketing, expanded to Sales, Service, Content, and increasingly Commerce). We think this is a testament to HUBS’s mgmt., which we view as best-of-breed. By methodically building the platform breadth and depth, HUBS is now gaining traction upmarket, which is key to sustaining mid-to-high teens growth over the medium term. HUBS is also building a more robust partner network, which is further accelerating upmarket traction.”
Looking ahead, and specifically looking at HubSpot’s use of AI to chart a new path ahead, the Cantor analyst remains upbeat, adding to his comments above, “HUBS’ organically built platform is well-positioned to leverage AI and strengthen its competitive edge. Breeze AI is already driving higher Content Hub attach rates (tripled y/y in 1Q). Further, we think Breeze will play an important role in unlocking Service Hub traction, which is critical to HUBS’ next leg of growth.”
Unsurprisingly, VanVliet rates HUBS stock as Overweight (i.e., Buy). His price target, set at $775, indicates room for an upside potential of 28.5% on the one-year horizon.
HubSpot has picked up 28 recent analyst recommendations, which include 24 to Buy against just 4 to Hold, for a Strong Buy consensus rating. The stock is selling for $602.61, and its $749.32 average price target implies a potential one-year gain of 24%. (See HUBS stock forecast)
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Disclaimer: The opinions expressed in this article are solely those of the featured analyst. The content is intended to be used for informational purposes only. It is very important to do your own analysis before making any investment.