UBS has reiterated its 'buy' rating on The Sage Group PLC (LSE:SGE) with a 1,025p price target, after meeting with the company's chief technology officer Aaron Harris, who made a confident case for artificial intelligence as a driver of both customer value and pricing power.
Harris told the bank that AI has been embedded in Sage's products since well before the recent wave of public interest in the technology.
Task-based automation was built into its Intacct accounting platform from 2020, with more interactive query tools following in 2022 and autonomous workflow agents now being rolled out.
The most recent example, a monthly close agent within Intacct, is reportedly cutting month-end closing times by 90% and saving customers tens of hours of work, giving Sage a concrete justification for pushing through price increases.
The company does not expect AI to reduce the number of software licences customers buy. Instead, Harris argued, it gives businesses more capacity to scale without adding headcount, making the software more valuable rather than more replaceable.
UBS also took comfort from Sage's position on margins. The company reset its cost base lower several years ago, specifically to fund this kind of investment, meaning the current AI push does not require a fresh spending surge.
The bank expects operating margins to continue expanding gradually, from around 24.5% this financial year toward 25.5% by 2030.
Sage shares were trading at 842.4p in afternoon trading. Interim results are due on 21 May.