In this article, we will look at some small-cap software names that are oversold and offer attractive upside potential for investors.
On April 14, Jeff Kilburg, Founder and Chief Executive of KKM Financial, appeared on CNBC’s Power Lunch to discuss the current dynamics shaping the technology sector. He said that there has been a noticeable disparity in the industry during 2026, where the semiconductor and software segments have taken opposite paths. According to Kilburg, although the semiconductor industry has been doing extremely well, the software industry has been overlooked and is now witnessing a comeback.
Kilburg pointed to a roughly 50% dispersion between the IGV software exchange-traded fund and the SOX semiconductor index year to date, highlighting selective opportunities in software names like Oracle. He also flagged Intel as a standout performer, noting the stock has climbed 60% and could log its 10th consecutive positive session, an event that has not occurred in 21 years. The rally has been fueled by a government stake acquired around $20 last August and Intel’s new foundry partnership with Tesla. Kilburg sees further upside as Intel’s foundry business scales from $300 million in revenue to a potential $2-3 billion, positioning the company as a credible challenger to Taiwan Semiconductor.
The bottom line is obvious: tech investors need to be picky, knowing which areas are driving an insatiable demand for chips through artificial intelligence and looking for the right places where software stocks have been overlooked. With that background, let’s explore our 10 Oversold Small-Cap Software Stocks Offering Massive Upside.
Photo by Lucas Law on Unsplash
Our Methodology
To identify relevant stocks for this article, we screened U.S.-listed software companies with market capitalizations between $200 million and $2 billion. We further narrowed our search to identify stocks with an RSI below 30. Also, we only shortlisted stocks with at least 35% upside potential, according to consensus, as of the April 16 close. Finally, we selected 10 stocks with the highest upside and ranked them in ascending order.
Why are we interested in the stocks that hedge funds pile into? The reason is simple: our research has shown that we can outperform the market by imitating the top stock picks of the best hedge funds. Our quarterly newsletter’s strategy selects 14 small-cap and large-cap stocks every quarter and has returned 498.7% since May 2014, beating its benchmark by 303 percentage points (see more details here).
10. PagerDuty Inc. (NYSE:PD)
PagerDuty Inc. (NYSE:PD) is one of the 10 oversold small-cap software stocks offering massive upside.
Despite undergoing some bearish sentiment, the stock has witnessed some eye-catching developments in recent weeks, which make it an attractive investment option within the small-cap software space. Back on March 12, PagerDuty Inc. (NYSE:PD) unveiled a significant enhancement of its artificial intelligence integration ecosystem. Over 30 AI partners have been added to the integration directory in 11 different categories. The PagerDuty Operations Cloud uses this platform to integrate with leading AI-native systems and enterprise-level software applications.
The ecosystem offers automatic triage capabilities and aids faster root cause analysis through observability data ingestion. The ecosystem further supports developers with coding by offering operational context within development tools during pre-commit risk scoring.
Chief Executive Officer Jennifer Tejada highlighted that the companies have been trying to integrate AI agents fast enough, but their interoperability in production is the difficult part. She further added that the ecosystem integrates over 30 AI partners directly into operational processes, ensuring faster incident response times. Partnerships include plugins for Claude Code from Anthropic and Cursor and integration with LangChain. These enable developers to detect hazardous code modifications and conduct investigations inside their code environment, which adds to PagerDuty’s preeminence in AI-first operations.
PagerDuty Inc. (NYSE:PD) is a provider of digital operations management solutions. It gathers digital signals and data from almost any device or software-enabled system. Through AI and ML, it processes, forecasts, and addresses problems using the collected data. It caters to several industries, including retail, hospitality, and more.
9. Sprinklr Inc. (NYSE:CXM)
Sprinklr Inc. (NYSE:CXM) is one of the 10 oversold small-cap software stocks offering massive upside.
The company has been grabbing headlines in recent weeks with some interesting commercial initiatives. On April 7, Sprinklr Inc. (NYSE:CXM) unveiled its Spring 2026 Release, an important innovation in AI-driven insights, marketing automation, service intelligence, and platform management.
As per Karthik Suri, the Chief Product and Corporate Strategy Officer, this launch represents a crucial milestone in the way companies leverage AI for achieving their objectives. This is because with the growing number of customer queries being sorted by the agents without any human assistance, it becomes easy for the team to validate the same. With a more intuitive AI plus Studio and more intelligent copilots, brands can leverage these technologies to transform automation into tangible results and eventually into smoother and more personalized customer experiences.
Moreover, the company has also been striking strategic partnerships that could spark some interest from investors, who are aiming to gain exposure to quality small-cap software names. Back on March 31, it entered into a strategic alliance with CreatorIQ to harness creator intelligence and integrate it with the enterprise social network. This alliance will provide a holistic solution by integrating creator intelligence, social media management, and paid amplification into one single platform.
CreatorIQ’s unique Creator Graph will be integrated directly with Sprinklr’s enterprise social reporting system. It uses artificial intelligence algorithms that analyze 123 million posts by creators each day. It helps brands analyze the creator, organic, and paid performance in a unified manner and comprehend their effect on revenue and growth.
Sprinklr Inc. (NYSE:CXM) delivers cloud-based software to enterprises, mainly targeting customer-facing teams. Its services portfolio includes AI suites that help with several functions like unifying social media engagements, analytics, content lifecycle, and more. It also offers training and consultancy services.
8. Blackbaud Inc. (NASDAQ:BLKB)
Blackbaud Inc. (NASDAQ:BLKB) is one of the 10 oversold small-cap software stocks offering massive upside.
On March 17, Blackbaud Inc. (NASDAQ:BLKB) launched the general availability of its Development Agent, the first-ever expert AI agent embedded in a dedicated social impact platform. The goal of the agent is to assist with personalized donor relations and increase the amount of donations.
The President, CEO, and Chairman, Mike Gianoni, stated that there is a huge chance for the social impact sector to capitalize on advancements in agentic AI. If used properly, it can completely change how much people can do when working together for a common cause. The Development Agent runs independently in the Blackbaud environment and can identify, cultivate, and engage the donors through personalized interactions, something that the fundraising team would be unable to accomplish alone.
According to Paul Goldstein, Senior Director, there exists potential in cultivating middle-level donors who are wealthy but do not have a personal relationship with the organization. According to Brian Otis, the vice president for university advancement at the University of New Haven, the Development Agent makes the process of connecting with the donor quicker and more powerful. Blackbaud will work on expanding the agent through its product range.
Blackbaud Inc. (NASDAQ:BLKB) is a provider of AI-based technologies. It offers an extensive array of solutions such as financial management, grants and awards, fundraising and engagement, and education, to name a few. Additionally, it also offers professional and managed services, as well as data intelligence solutions.
7. Rapid7 Inc. (NASDAQ:RPD)
Rapid7 Inc. (NASDAQ:RPD) is one of the 10 oversold small-cap software stocks offering massive upside.
On April 13, Matthew Hedberg from RBC Capital reduced the price target on Rapid7 Inc. (NASDAQ:RPD) from $12 to $6. The analyst maintains a Sector Perform rating on the shares as part of his comprehensive report on the upcoming first quarter earnings in the Software sector.
Hedberg noted that sector sentiment is very weak amid volatility, driven largely by the threat of large language model competition. Given the uncertain macroeconomic environment caused by the Iran war, increased layoffs, and unfavorable foreign exchange, March’s earnings will not influence the mood. He expects companies to announce in-line earnings and maintain their outlook for the remainder of fiscal 2026.
Back on March 17, Rapid7 Inc. (NASDAQ:RPD) unveiled enhancements to its PACT Partner Program ahead of 2026. The program aims at ensuring a high level of alignment between Rapid7 and its partners, along with the scalable growth of the company through the channel. This development surely makes it one of the most attractive names in the small-cap software segment.
The updates also include partner tier segmentation, streamlined deal processes, and improvements in program economics. Given that more companies are seeking to incorporate artificial intelligence into their cybersecurity operations, the need for trusted partners has become increasingly apparent. The updates show the company’s dedication to creating an ecosystem of partners that are highly aligned and can be successful together.
Rapid7 Inc. (NASDAQ:RPD) is a seller of enterprise cybersecurity solutions and services. It provides cloud spaces for centralization and monitoring of data, performing end-to-end analysis of network traffic, automation solutions, and other services. It also provides day-to-day professional and advisory services.
6. Sprout Social Inc. (NASDAQ:SPT)
Sprout Social Inc. (NASDAQ:SPT) is one of the 10 oversold small-cap software stocks offering massive upside.
On April 13, Needham maintained its $14 target price for the stock, implying upside potential of more than 148%. The firm also maintained its Buy rating despite noting some weakness in the company’s execution relative to historical performance. They noted weaker performance in meeting some internal targets in 2025, indicating limited execution leeway and limited embedded upside for the business. Despite near-term headwinds, the firm’s bullish reaffirmation and upside potential signal a positive long-term view of Sprout Social Inc. (NASDAQ:SPT).
In another development, on March 18, the company announced that it swept G2’s 2026 Winter Reports, earning 198 leader badges across all business segments globally. The company ranked first in 59 individual reports, including the Grid Report for Social Media Listening Tools, the Enterprise Grid Report for Social Media Analytics, and the Grid Report for Social Customer Service.
Scott Morris, Chief Marketing Officer of Sprout, revealed that social media is becoming more critical when organizations are trying to figure out what the market and consumers want. According to Morris, the industry is adopting machine learning technology to be able to cope with volumes and complexities. The ranking, which is based on authentic consumer feedback, shows how much importance Sprout has started gaining as far as its business value to brands is concerned in today’s social environment.
What also creates the appeal for Sprout as one of the best oversold small-cap software stocks is the fact that the company is working on advancing its technologies in social intelligence and artificial intelligence that will enable companies to shift from reactive listening to predictive decision-making processes.
Sprout Social Inc. (NASDAQ:SPT) is a creator and operator of a web-based social media management platform. It uses cloud software and artificial intelligence to provide complete social media management and analysis solutions. Further, it also provides training and consultation services. The company serves marketing agencies, nonprofit organizations, and more.
While we acknowledge the potential of SPT to grow, our conviction lies in the belief that some AI stocks hold greater promise for delivering higher returns and have limited downside risk. If you are looking for an AI stock that is more promising than SPT and that has 100x upside potential, check out our report about the cheapest AI stock.
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