In this article, we will discuss the 10 Software Stocks Analysts Are Upgrading.
According to JPMorgan, the software sector remains a critical one for US venture investors, capturing ~60% of venture dollars in 2024, thanks to its scalability and high margins. Amidst subdued IPO activity since 2021, mergers and acquisitions have become a key exit strategy for startups. US-based companies dominated the broader M&A landscape, led by goals such as enhancing product offerings as well as expansion of market reach.
Current Trends in the Software Industry
As per JPMorgan, the valuation multiples for numerous public software companies have witnessed a decline from their peak in 2021. Due to the elevated interest rate environment, difficult geopolitical landscape, and sideways stock market performance, several public software companies have pivoted their focus on operational efficiency and profitability. They have moved away from growth.
The shift is evidenced by converging trajectories of EBITDA margins and growth rates in revenue. The concurrent decline in revenue multiples demonstrates the importance of high growth in a bid to justify elevated valuations. However, Ideal Market Research believes that the acceleration of digital transformation continues to amplify demand for software testing services, with companies scaling cloud-native applications, mobile-first platforms, and AI-driven solutions.
Amidst such trends, we will now have a look at the 10 Software Stocks Analysts Are Upgrading.
A close-up of a server running a cloud-native platform, symbolizing the power of the software-as-a-service (SaaS) business area.
Our Methodology
To list the 10 Software Stocks Analysts Are Upgrading, we sifted through several online rankings to get an extensive list of stocks that have been upgraded by Wall Street analysts recently. Next, we chose the ones that are popular among hedge funds. Finally, the stocks have been arranged in ascending order of their hedge fund sentiments, as of Q1 2025.
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 373.4% since May 2014, beating its benchmark by 218 percentage points (see more details here).
10 Software Stocks Analysts Are Upgrading
10. SAP SE (NYSE:SAP)
Number of Hedge Fund Holders: 33
SAP SE (NYSE:SAP) is one of the 10 software stocks analysts are upgrading. On June 13, research firm Warburg Research upped the price objective on the company’s stock from €275 to €295, while maintaining a “Buy” rating. The firm’s analyst, Andreas Wolf, sees further cloud growth and margin improvements, which led to the increase in long-term estimates. Furthermore, the analyst opines that AI is expected to fuel growth further and make software development more efficient.
In Q1 2025, SAP SE (NYSE:SAP)’s current cloud backlog expanded 29% at constant currencies and the total revenue encountered a double-digit increase. With a share of more predictable revenue of 86%, the business model is resilient in uncertain times. Furthermore, SAP SE (NYSE:SAP)’s AI-powered portfolio allows companies to navigate supply chain disruptions in more than 130 countries. In Q1 2025, the company’s cloud and software revenue rose 14% to €7.94 billion, and was up 13% at constant currencies.
In January 2024, SAP SE (NYSE:SAP) announced a company-wide restructuring program, which was concluded in Q1 2025. The restructuring payouts came in at €2.5 billion for FY 2024 and €0.3 billion for Q1 2025. Furthermore, ~€0.4 billion is anticipated to be paid out in the balance of 2025.
SAP SE (NYSE:SAP) offers enterprise applications and business solutions.
9. Klaviyo, Inc. (NYSE:KVYO)
Number of Hedge Fund Holders: 36
Klaviyo, Inc. (NYSE:KVYO) is one of the 10 software stocks analysts are upgrading. On June 13, Wells Fargo upgraded the company’s shares to “Overweight” from “Equal Weight,” while raising the price objective to $40 from the prior target of $32. The firm has meaningfully shifted its view on Klaviyo, Inc. (NYSE:KVYO)’s shares, as it believes that several concerns have been addressed.
Klaviyo, Inc. (NYSE:KVYO) is in the early stages of unlocking international markets, with growth stable at 45% over the previous 4 quarters, and has a strategic emphasis on capturing more e-commerce wallet share given its entry into the service. These factors, together with the improvement in competitive positioning, have led the firm to believe that Klaviyo, Inc. (NYSE:KVYO) has a favorable path ahead for durable and outsized growth.
Klaviyo, Inc. (NYSE:KVYO) ended Q1 2025 with 3,030 customers garnering more than $50,000 of ARR as compared to 2,157 at Q1 2024 end, reflecting an increase of 40% YoY. The company added that more than 169,000 customers use Klaviyo to fuel their revenue growth as of March 31, 2025, compared to more than 146,000 customers as of March 31, 2024. Sands Capital, an investment management company, released its Q1 2025 investor letter. Here is what the fund said:
“Klaviyo, Inc. (NYSE:KVYO) is an innovative provider of business-to-consumer (B2C) marketing technology. The business reported a strong 2024 fourth quarter result, with key metrics exceeding both consensus and our expectations. While shares declined—due to high pre-earnings expectations, a slightly softer guide, and the broader tech selloff—we view the business as executing well. Management continues to improve communication and operational delivery, with strong momentum across upmarket adoption, international expansion, and product innovation. The standout announcement was the launch of a full CRM platform that integrates marketing, customer service, and analytics. This shift positions Klaviyo as a true platform business for B2C brands, in our view, and expands its AI opportunity.”
8. DocuSign, Inc. (NASDAQ:DOCU)
Number of Hedge Fund Holders: 41
DocuSign, Inc. (NASDAQ:DOCU) is one of the 10 software stocks analysts are upgrading. On June 13, Wells Fargo analyst Michael Turrin upped the company’s stock to “Equal Weight” from “Underweight,” lifting the price objective to $80 from the previous target of $67. As per the firm, the investors are required to be selective during the summer in software. That being said, it opines that the H2 of the year can see a rebound as macro noise dissipates and seasonal buying behavior takes the front seat.
Wells Fargo stated that the expectations are now more reasonable after the underwhelming Q1 2026 results. As per the firm, DocuSign, Inc. (NASDAQ:DOCU) has a relatively undemanding multiple. In Q1 2026, the company saw FCF of $227.8 million as compared to $232.1 million in the same period of the previous year. For the quarter ending July 31, 2025, DocuSign, Inc. (NASDAQ:DOCU) expects total revenue of between $777 million – $781 million and subscription revenue of $760 million – $764 million.
For the full year revenue, the annual guidance midpoint has been increased by $22 million, implying the combination of Q1 strength and an expected neutral rather than a negative YoY FX impact. This was partially offset by the headwind from additional bookings prudence for the broader economic environment.
7. Zscaler, Inc. (NASDAQ:ZS)
Number of Hedge Fund Holders: 46
Zscaler, Inc. (NASDAQ:ZS) is one of the 10 software stocks analysts are upgrading. On June 13, Wells Fargo upgraded the company’s stock to “Overweight” from “Equal Weight,” lifting the price objective to $385 from the previous target of $260. As per the firm, software infrastructure spending in H2 2025 is expected to be driven by the adoption of agentic AI, which tends to benefit several software companies, including Zscaler, Inc. (NASDAQ:ZS).
The research firm cited Zscaler, Inc. (NASDAQ:ZS)’s potential to reach $5 billion in annual recurring revenue by fiscal 2027 as one of the measures of the upgrade. Despite the increase in the stock price YTD, the firm believes it still possesses significant room for multiple expansion. Well Fargo expects more than 20% billings growth in FY 2026 and continues to see margin expansion continuing, together with revenue growth. Notably, the company’s stock has increased by ~66% on a YTD basis.
In May 2025, Zscaler, Inc. (NASDAQ:ZS) signed a definitive agreement to acquire Red Canary, which is a leading managed detection and response (MDR) vendor. Through the combination of Zscaler, Inc. (NASDAQ:ZS)’s high-volume and high-quality data with Red Canary’s domain expertise in MDR, Zscaler, Inc. (NASDAQ:ZS) plans to ramp up its vision to deliver AI-powered security operations.
6. Automatic Data Processing, Inc. (NASDAQ:ADP)
Number of Hedge Fund Holders: 65
Automatic Data Processing, Inc. (NASDAQ:ADP) is one of the 10 software stocks analysts are upgrading. On June 13, Mizuho increased the price objective on the company’s stock to $332.00 from $321.00, while maintaining an “Outperform” rating. The firm believes that Automatic Data Processing, Inc. (NASDAQ:ADP) has done a good job over the past few years in improving product and execution.
The research firm remains optimistic about Automatic Data Processing, Inc. (NASDAQ:ADP)’s future prospects as it has been introducing revamped products throughout the market segments and continues to leverage its human capital management industry-leading data and scale with tools such as AI in a bid to improve efficiencies. Automatic Data Processing, Inc. (NASDAQ:ADP)’s strategic moves, like the acquisition of PEI in Mexico, focus on enhancing its global payroll capabilities and aiding the Latin America region.
With the help of integrating PEI’s payroll expertise in Mexico with Automatic Data Processing, Inc. (NASDAQ:ADP)’s global reach and comprehensive HCM solutions, the focus is on enhancing the experience. For FY 2025, the company expects revenue growth of 6% – 7% and adjusted EBIT margin expansion of 40 – 50 bps. Furthermore, it anticipates diluted EPS growth of 9% – 10%.
Automatic Data Processing, Inc. (NASDAQ:ADP) provides cloud-based human capital management (HCM) solutions.
5. Palantir Technologies Inc. (NASDAQ:PLTR)
Number of Hedge Fund Holders: 77
Palantir Technologies Inc. (NASDAQ:PLTR) is one of the 10 software stocks analysts are upgrading. On June 12, Loop Capital analyst Mark Schappel upped the price objective on the company’s stock to $155 from $130, while maintaining a “Buy” rating, as reported by The Fly. Loop Capital viewed a demonstration of the company’s AIP product and discussed broader enterprise AI industry trends, competitive dynamics, as well as its differentiators.
The firm remained optimistic about Palantir Technologies Inc. (NASDAQ:PLTR), and believes that it is an early software leader in enterprise AI, which remains at a tipping point with pilot programs moving into production and AI use cases expanding throughout industries. Overall, the firm’s investment thesis stems from 3 critical factors. These include the exposure to early-stage AI market opportunity, seemingly endless potential AI use cases amidst few TAM constraints on growth, and Palantir Technologies Inc. (NASDAQ:PLTR)’s position as a leader in the overall enterprise AI space.
In Q1 2025, the US revenue increased 55% YoY and 13% QoQ to $628 million, with the US commercial revenue increasing 71% YoY and 19% QoQ to $255 million. Palantir Technologies Inc. (NASDAQ:PLTR) closed 139 deals of at least $1 million, 51 deals of at least $5 million, and 31 deals of at least $10 million. Jackson Peak Capital, an investment management firm, released its Q1 2025 investor letter. Here is what the fund said:
“Palantir Technologies Inc. (NASDAQ:PLTR) was a contributor as a long event-driven trade. We held PLTR into and through its Q4 earnings. The thesis was that it would continue its beat and raise cadence and have investors chasing the right tail as management lays out what’s possible under the new administration in DC, announcing new contract wins. It also benefitted from market structure dynamics with institutions underweight and PLTR joining the Nasdaq 100 index in December.”
Palantir Technologies Inc. (NASDAQ:PLTR) is a core player in the broader software industry as it develops and sells enterprise software platforms, mainly for big data integration, AI, and analytics.
4. Intuit Inc. (NASDAQ:INTU)
Number of Hedge Fund Holders: 87
Intuit Inc. (NASDAQ:INTU) is one of the 10 software stocks analysts are upgrading. On June 13, Wells Fargo analyst Michael Turrin upped the company’s price objective to $880 from $825, while keeping an “Overweight” rating, as reported by The Fly. The firm believes that reduced economic uncertainties and a resurgence in typical purchasing patterns are expected to result in a recovery in the broader software sector during the latter part of the year. Intuit Inc. (NASDAQ:INTU) delivered a healthy Q3 2025 thanks to the outstanding tax season and continued momentum in its Global Business Solutions Group and Credit Karma.
During Q3 2025, Intuit Inc. (NASDAQ:INTU)’s Global Business Solutions Group revenue rose to $2.8 billion, reflecting a rise of 19%. Furthermore, the Online Ecosystem revenue increased to $2.1 billion, up by 20%. For the full fiscal year, Intuit Inc. (NASDAQ:INTU) expects TurboTax Live revenue to increase by 47% to $2.0 billion, representing ~40% of total Consumer Group revenue, while TurboTax Live units are expected to grow by 24%.
TurboTax Online paying units are expected to grow ~6% due to share gains from higher average revenue per return (ARPR) filers, with ARPR likely to increase ~13% as more customers choose assisted offerings and faster access to refunds. Parnassus Investments, an investment management company, released the Q3 2024 investor letter. Here is what the fund said:
“Intuit Inc. (NASDAQ:INTU) shares fell despite the financial software company posting strong quarterly results. The company’s pricing-dependent long-term guidance concerned investors. However, we continue to believe Intuit’s customer growth and relevant platform will sustain its wide moat and long growth runway.”
Intuit Inc. (NASDAQ:INTU) is a leading player in the broader software industry, as it is known for its financial and tax software products.
3. Oracle Corporation (NYSE:ORCL)
Number of Hedge Fund Holders: 97
Oracle Corporation (NYSE:ORCL) is one of the 10 software stocks analysts are upgrading. On June 12, Citi raised the price target on the company’s stock to $196 from $186, while keeping a “Neutral” rating. The firm believes that Oracle Corporation (NYSE:ORCL)’s Q4 2025 results are incrementally positive considering fiscal 2026 demand. That being said, the company’s near-term earnings and FCF estimates have been falling.
As per Citi, Oracle Corporation (NYSE:ORCL) posted a strong Q4 2025, while it saw modest bookings growth. However, this was overshadowed by a strong fiscal 2026 sales outlook amidst accelerating cloud, remaining performance obligation, and total revenue growth, added the analyst. Oracle Corporation (NYSE:ORCL) expects its total cloud growth rate, applications plus infrastructure, to increase from 24% in FY 2025 to more than 40% in FY 2026.
Notably, the Cloud Infrastructure growth rate is anticipated to increase from 50% in FY 2025 to more than 70% in FY 2026, while RPO is projected to grow over 100% in FY 2026. Also, Oracle Corporation (NYSE:ORCL) anticipates triple-digit MultiCloud revenue growth to continue in FY 2026. Ariel Investments, an investment management company, released its Q1 2025 investor letter. Here is what the fund said:
“Lastly, global leader in enterprise software, Oracle Corporation (NYSE:ORCL), traded lower alongside the broader technology sector due to macroeconomic uncertainty and in particular, the near-term prospects for artificial intelligence investment (AI) spending. As a result, ORCL reported weaker than expected quarterly earnings results. Nonetheless, management expects double-digit growth for fiscal 2026 and 2027, citing significant demand for its cloud and AI capabilities. This supports our view that ORCL’s positioning as the leading provider of database software and cloud-based infrastructure is entrenched, making it a key beneficiary of global demand for generative AI development.”
2. Adobe Inc. (NASDAQ:ADBE)
Number of Hedge Fund Holders: 111
Adobe Inc. (NASDAQ:ADBE) is one of the 10 software stocks analysts are upgrading. On June 13, BofA analyst Brad Sills upped the company’s price objective to $475 from $424, while maintaining a “Buy” rating, as reported by The Fly. As per the firm, Adobe Inc. (NASDAQ:ADBE)’s Q2 2025 results and outlook exhibit strong execution amidst a sluggish software demand backdrop, while its AI optionality remains intact. The firm’s analyst hinted at a more resilient and diversified business, as well as healthy execution on growth initiatives.
For FY 2025, the company targets total Adobe revenue of between $23.50 billion – $23.60 billion, and digital media segment revenue of between $17.45 billion – $17.50 billion. In Q2 2025, Adobe Inc. (NASDAQ:ADBE)’s digital media segment revenue came in at $4.35 billion, representing 11% YoY growth, or 12% in constant currency. Digital Media ARR, while exiting the quarter, came in at $18.09 billion, reflecting 12.1% growth YoY.
While Adobe Inc. (NASDAQ:ADBE)’s AI-influenced ARR continues to contribute, the company’s AI book of business from AI-first products like Acrobat AI Assistant, Firefly App and Services, and GenStudio for Performance Marketing has been tracking ahead of the $250 million ending ARR target by FY 2025 end.
Adobe Inc. (NASDAQ:ADBE) is engaged in developing and selling creative, document, design, and marketing software. Aristotle Capital Management, LLC, an investment management company, released its Q1 2025 investor letter. Here is what the fund said:
“Adobe Inc. (NASDAQ:ADBE), the leading provider of content creation and publishing software, was a notable detractor during the quarter. This came despite the company reporting record revenue of over $5.7 billion in the first quarter—a 10% year-over-year increase, with double-digit increases across both its Digital Media and Digital Experience segments. The disconnect between strong fundamentals and share price weakness reflects ongoing market concerns around intensifying competitive threats from generative AI and lower-cost design platforms. Market sentiment has remained cautious around the perceived disruption risk posed by new AI-driven entrants, including OpenAI’s Sora for video generation and platforms like Canva, which cater to the broader prosumer and small and medium-sized business segment. However, we continue to view these as largely non-overlapping with Adobe’s core base of creative professionals, enterprises and agencies—audiences that demand precision, control and integration within larger workflows. Canva, while expanding its feature set, remains limited in its enterprise readiness and depth. Sora, meanwhile, remains early-stage and experimental, with limited commercial application at this point. Crucially, Adobe is not standing still. The company is actively embedding generative AI across its ecosystem through Firefly, which is commercially safe (i.e., free of copyrighted sources to train its models) and integrated natively into Creative Cloud applications like Photoshop and Illustrator. Firefly has shown strong early traction, generating $125 million in annualized recurring revenue, with management expecting that figure to double by year end. While modest in size relative to Adobe’s total revenue, Firefly’s monetization strategy is still in its early innings, with further potential through upselling, usage-based pricing and expanded use cases. Beyond monetization, AI integration enhances Adobe’s long-term competitive moat through product functionality, stronger customer engagement and increased switching costs. Adobe’s unique access to proprietary data, content workflows and creative content allows it to fine-tune models that serve the high-end needs of professionals—capabilities that generic AI models lack. Strategic partnerships with Microsoft (e.g., Firefly in Microsoft 365 Copilot) and ongoing momentum in Adobe Express further extend its reach into new user segments. Ultimately, we believe Adobe has a durable competitive advantage, underpinned by a large installed base, subscription-led business model, strong brand equity and a long track record of innovation. While short-term concerns over AI disruption have weighed on the stock price, we believe Adobe is well-positioned to harness AI as a driver of value rather than being displaced by it.”
1. Microsoft Corporation (NASDAQ:MSFT)
Number of Hedge Fund Holders: 284
Microsoft Corporation (NASDAQ:MSFT) is one of the 10 software stocks analysts are upgrading. On June 13, Wells Fargo upped the price objective on the company’s stock to $565 from $515, while keeping an “Overweight” rating, as reported by The Fly. As per the firm, the investors need to be selective during the summer in software. Overall, H2 of the year is expected to be aided by a rebound as macro noise takes a breather and seasonal buying starts to pitch in. In Q3 2025, Microsoft Corporation (NASDAQ:MSFT)’s cash flow from operations came in at $37 billion, reflecting a rise of 16%. This was aided by robust cloud billings and collections, which were partially offset by increased tax payments.
For Intelligent Cloud, in Q4 2025, Microsoft Corporation (NASDAQ:MSFT) expects revenue to come between $28.75 billion – $29.05 billion, or growth of 20% – 22% in constant currency. The revenue is expected to be driven by Azure, which can have quarterly variability mainly from in-period revenue recognition depending on the mix of contracts. In Azure, Microsoft Corporation (NASDAQ:MSFT) expects Q4 2025 revenue growth of between 34% – 35% in constant currency, aided by robust demand for its portfolio of services.
RiverPark Advisors, an investment advisory firm and sponsor of the RiverPark family of mutual funds, released its Q1 2025 investor letter. Here is what the fund said:
“Microsoft Corporation (NASDAQ:MSFT) shares were lower in the quarter despite reporting solid results. Investor expectations around AI monetization timelines moderated, and there was some rotation out of mega-cap tech. Microsoft remains a key enabler of enterprise digital transformation, with leading positions in cloud infrastructure, productivity software, and AI services. With durable growth, operating leverage, and strategic positioning across multiple secular trends, we remain highly confident in Microsoft’s long-term outlook.”
While we acknowledge the potential of MSFT 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 MSFT and that has 100x upside potential, check out our report about this cheapest AI stock.
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Disclosure: None.
