The Software Sector Is Rebounding: 5 Stocks Worth Buying Today

Resilient Software Giants Amid AI Disruption

Over recent months, major software companies have faced intense scrutiny as concerns about artificial intelligence reshaping the industry have grown. Despite these worries, most leading firms have seen little impact on their core business metrics. Revenue and profit projections remain robust, with many companies still anticipating growth rates in the high teens to mid-20% range. At the same time, sector valuations have dropped to some of the most appealing levels in years.

While AI is poised to revolutionize productivity and business operations, this shift does not spell the end for top enterprise software providers. In fact, many are expected to benefit significantly as they incorporate AI features into their platforms, enhancing the value they deliver to customers.

The iShares Expanded Tech-Software ETF (IGV) recently experienced a steep decline of up to 35%, with several individual stocks falling by more than half. Such widespread selling often signals a turning point, as market sentiment becomes overly negative.

Recently, the software sector has begun to stabilize, and some prominent names are already showing signs of recovery. Although it is difficult to pinpoint the absolute bottom, many high-quality companies are now trading at prices that offer attractive long-term prospects.

Notable opportunities currently include Salesforce (CRM), ServiceNow (NOW), AppLovin (APP), The Trade Desk (TTD), and HubSpot (HUBS).

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GARP: Growth at a Reasonable Price in Software Stocks

Software firms have historically enjoyed some of the most lucrative business models, featuring high profit margins, recurring income, low capital needs, and minimal incremental costs. These strengths led to premium valuations for years, with many stocks trading at lofty multiples that were difficult to sustain.

Even after the recent downturn, some companies remain pricey. However, the sharp correction has brought several top-tier names back to more reasonable valuations, especially from a growth-at-a-reasonable-price (GARP) perspective. For investors willing to look beyond recent volatility, these businesses now offer compelling blends of growth and value.

• HubSpot stands out with a Zacks Rank #1 (Strong Buy) rating. Its shares are priced at about 23.7 times forward earnings, with revenue expected to grow in the high teens both this year and next. Analysts anticipate nearly 19% annual earnings growth over the next three to five years.
• AppLovin has emerged as a market leader since 2023, thanks to its strong position in digital advertising. The stock trades at roughly 32.6 times forward earnings, with sales projected to rise nearly 40% this year and 30% next year. Long-term earnings growth is expected to exceed 31% annually.
• ServiceNow continues to achieve impressive growth as businesses expand their use of workflow automation and digital tools. Shares are valued at about 29.1 times forward earnings, with revenue forecasted to grow 20% this year and 18% next year. Analysts predict long-term earnings growth of around 24% annually.
• Salesforce, a pioneer in SaaS, now trades at a more modest 15.3 times forward earnings. Although growth has slowed as the company matures, revenue is still expected to increase 11% this year and 9% next year, with long-term earnings growth estimated at 14% annually.
• The Trade Desk offers perhaps the greatest value in the group, trading at approximately 14.3 times forward earnings. Analysts expect earnings to grow nearly 20% annually over the long term, with revenue projected to rise 13% this year and 14% next year.

AI Integration Fuels Software Sector Growth

Artificial intelligence is becoming a catalyst for growth among software companies. Leading platforms are embedding AI into their products, automating processes, improving decision-making, and delivering enhanced capabilities to users. These innovations could drive greater adoption and expand opportunities for major software firms.

As AI tools evolve, the way users interact with software may change dramatically. While current implementations may not define future usage, many industry leaders are actively experimenting and integrating new technologies, showing a commitment to innovation rather than resistance.

• HubSpot has quickly incorporated AI into its CRM platform through Breeze AI, automating marketing content, customer support, and sales prospecting. This enables small and medium businesses to manage sophisticated operations with less manual effort.
• AppLovin utilizes AI in its AXON advertising engine, employing machine learning to optimize ad targeting and maximize returns for mobile developers. The system analyzes vast amounts of user data to improve ad placements, with recent AI enhancements boosting performance and monetization.
• ServiceNow integrates generative AI via Now Assist, automating tasks like IT support, HR requests, and customer service. These tools help organizations reduce manual workloads and speed up response times.
• Salesforce has made AI central to its platform with Einstein AI and Einstein Copilot, which analyze customer data, generate reports, automate workflows, and assist sales teams. By embedding AI into CRM processes, Salesforce is transforming how companies manage customer relationships and sales.
• The Trade Desk applies AI throughout its programmatic advertising platform to enhance campaign optimization and audience targeting. Its AI-driven tools allow advertisers to allocate budgets efficiently and refine targeting based on real-time data.

Collectively, these advancements show that leading software companies are embracing AI, integrating it into their platforms, and evolving their products to meet new demands.

Are CRM, NOW, HUBS, APP, and TTD Worth Buying Now?

The recent decline in software stocks appears to be driven more by sentiment than by fundamental weakness. Revenue growth remains strong for many sector leaders, and companies continue to enhance their platforms with AI-powered features.

Valuations have reset after years of high multiples, making several high-quality software stocks more attractive for investors seeking growth at reasonable prices.

Although the precise market bottom is uncertain, companies such as Salesforce, ServiceNow, HubSpot, AppLovin, and The Trade Desk are well-positioned to benefit from the next wave of AI-driven productivity. For those looking to selectively invest in software after a significant correction, these stocks present compelling opportunities.

Top Stock Picks with Potential to Double

Our research team has identified five stocks with the highest likelihood of gaining over 100% in the coming months. Among them, Director of Research Sheraz Mian highlights a standout satellite-based communications company. As the space industry is projected to reach a trillion-dollar valuation and the firm’s customer base expands rapidly, analysts expect a major revenue surge in 2025. While not all picks will be winners, this one could far outperform previous top selections like Hims & Hers Health, which soared over 200%.