In this article, we will look at the 10 Profitable SaaS Companies for 2026.
On February 10, Dan Ives from Wedbush appeared on a CNBC Television interview to share his thoughts on the software sell-off. Ives has recently moved some of the beaten-down software names into his top 20 AI picks for the year. Two of the prominent names include Salesforce (down more than 43% over the past 12 months) and ServiceNow (down more than 48% over the same period). This bold move by Ives is based on the conviction that the software will remain the heart and lungs of the AI revolution. Ives added that currently, the market is still in the early stage of a 10-year AI buildout and is focused on GPUs and infrastructure. However, in the long-term software is going to be key in terms of presenting and justifying the use cases of the infrastructure that is being built today.
Ives argued that to say companies such as Salesforce and ServiceNow are structurally broken is one of the most disconnected arguments he has heard in his career. He elaborated that, considering the market penetration and deep integration with enterprises of these companies, they will easily add numerous new customers as AI use cases start to present themselves. Ives believes that the current valuations of most of the software companies do not factor in 20-30% incremental revenue, making them look expensive at the surface level.
With that, let’s take a look at the 10 Profitable SaaS Companies for 2026.
Our Methodology
To curate the list of 10 Profitable SaaS Companies for 2026, we used the Finviz stock screener, WSJ, and Insider Monkey’s Q3 2025 database as our sources. Using the screener, we aggregated a list of SaaS companies with more than 15% net margins (TTM). We narrowed our list to stocks with the highest net income (TTM). Lastly, we ranked the stocks in ascending order of the number of hedge fund holders sourced from Insider Monkey’s database.
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 427.7% since May 2014, beating its benchmark by 264 percentage points (see more details here).
10 Profitable SaaS Companies for 2026
10. SAP SE (NYSE:SAP)
Number of Hedge Fund Holders: 34
SAP SE (NYSE:SAP) is one of the Profitable SaaS Companies for 2026. On February 10, Nay Soe Naing from Berenberg Bank reiterated a Buy rating on the stock with a €250 price target. The bullish sentiment comes amidst growing concerns regarding GenAI disrupting the SaaS business model, which has led to a valuation reset within the software sector.
The share price of SAP SE (NYSE:SAP) has fallen more than 14.72% over the past month. Earlier on February 4, Frederic Boulan from Bank of America Securities released a research note highlighting SAP as an attractive investment amidst a valuation reset. He noted,
“the space is now trading at 13.1x EV/EBITDA vs 5y average of 21x. U.S. software compressed 35% in the past 6 months from 32.3x to 21x.”
SAP has also undergone significant repricing and trades at 20.7x 2027 earnings, down from 34x a year ago. Regardless, Boulan has a Buy rating on SAP SE (NYSE:SAP) with a €302 price target. He noted that the current prices overly discount the company’s strengths and growth potential. BofA used a reverse discounted cash flow model with unchanged 2026–2030 forecasts to find that the current price implies a -3% revenue CAGR post-2030, a 14% revenue drop by 2035, and 20% EBIT decline.
BofA finds the current valuation unrealistic as it assumes customer churn acceleration and a halt to on-premise to cloud migration, which the bank notes to be “unlikely.” Analyst Boulan highlighted that software companies such as SAP SE (NYSE:SAP) have strong domain expertise and complex business integrations, which make them less vulnerable to being replaced by AI tools.
SAP SE (NYSE:SAP) develops enterprise application software, primarily ERP systems that centralize data management and streamline business processes like finance, supply chain, and HR.
9. Paychex, Inc. (NASDAQ:PAYX)
Number of Hedge Fund Holders: 53
Paychex, Inc. (NASDAQ:PAYX) is one of the Profitable SaaS Companies for 2026. On February 10, Andrew Nicholas from William Blair reiterated a Hold rating on the stock without disclosing any price target. Earlier, on January 26, Ramsey El Assal from Cantor Fitzgerald initiated Paychex, Inc. (NASDAQ:PAYX) with a Sell rating and a $98 price target.
Cantor Fitzgerald doubts the ability of Paychex to speed up its organic revenue growth as the competition in the small and medium business SMB continues to increase. In addition, the economic headwinds also add further concerns. The firm also highlighted the company’s recent acquisition of Paycor, which it believes positions Paychex in larger markets. However, Cantor calls the deal a largely defensive move with unclear benefits for long-term organic growth.
During fiscal Q2 2026, the company delivered 18.28% top-line growth along with a 21% increase in adjusted operating income. Management raised the lower end of the adjusted diluted EPS outlook for 2026 from 9% growth to 10%, as the company expects interest on funds held for clients to be at the high end of the anticipated range.
Overall, Wall Street remains bullish on Paychex, Inc. (NASDAQ:PAYX), with analysts’ 12-month median price target reflecting more than 21% upside from the current level.
Paychex, Inc. (NASDAQ:PAYX) provides integrated human capital management (HCM) solutions focused on payroll, HR, benefits, and insurance for small- to medium-sized businesses mainly in the U.S. and Europe. It leverages its SaaS platforms like Paychex Flex and SurePayroll to offer services.
