In this article, we will take a look at some of the best small-cap software infrastructure stocks. On July 2, Gartner’s Managing VP Analyst, George Brocklehurst, shared his views on how the enterprise software industry is facing pressure from AI-powered agents that challenge the conventional consumption and pricing mechanisms. Gartner also mentioned that around $234 billion in capital outlays on SaaS, estimated till 2030, is exposed to risk from agentic arbitrage.
He added that agentic AI reshapes software economics, which is expected to shift IT budgets towards results-driven services despite software investments forecasted to grow by approximately 12% by 2030. Brocklehurst stated that the shift poses a serious threat to vendors defending traditional SaaS dashboards and licensing models, but at the same time, it creates significant revenue potential for those developing innovative solutions.
Brocklehurst told Channel Dive that enterprise buyers are overwhelmed and they do not want to spend more on IT faster. Rather, they want to focus on better outcomes. Large volumes of enterprise software spending over the next several years will be redirected towards providers that offer agents trained around organizational data.
Gartner estimates that only a small proportion of agents currently on the market can meet the demands of business process automation.
With that background, let’s explore our 11 Small-Cap Software Infrastructure Stocks to Buy Now.
Our Methodology
To identify relevant stocks for this article, we screened U.S.-listed software infrastructure companies with market capitalizations between $300 million and $2 billion. Also, we only shortlisted stocks with at least 10% upside potential per consensus as of July 2 closing. Finally, we selected 11 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 599.2% since May 2014, beating its benchmark by 372 percentage points (see more details here).
11. Repay Holdings Corp. (NASDAQ:RPAY)
Repay Holdings Corp. (NASDAQ:RPAY) is one of the best 11 small-cap software infrastructure stocks to buy now.
On June 18, Repay Holdings Corp. (NASDAQ:RPAY) completed its first successful proof of concept, allowing the acceptance of Stablecoin payments via its platform. This represented a significant milestone in REPAY’s efforts to evaluate blockchain payment solutions for its enterprise clients and their end-users.
The proof of concept was a fully functional demonstration of a consumer-to-business transaction executed on the Stellar blockchain system. Consumers with a compatible digital wallet could initiate a transfer of USD Coin to a corresponding wallet belonging to a REPAY client. USD Coin is a fiat-backed, regulated stablecoin pegged to the U.S. Dollar at 1:1.
The demonstration was built around utilizing the company’s existing technology stack and provides an easy-to-use interface. When a consumer selected USD Coin as a payment method, details of the transaction were displayed, and upon review of the information, the consumer authorized payment using their internet-based browser wallet extension.
Upon confirmation of the transaction, both the Stellar and REPAY systems would reflect that the transaction has been completed, and funds will be available to the CLIENT’s wallet shortly thereafter.
Repay Holdings Corp. (NASDAQ:RPAY) is a payments technology company that provides integrated payment processing solutions to consumers and businesses. Some of the payment processing solutions it offers include debit and credit card processing, ACH processing, e-cash, digital wallet services, and virtual credit card processing.
10. Cognyte Software Ltd. (NASDAQ:CGNT)
Cognyte Software Ltd. (NASDAQ:CGNT) is one of the best 11 small-cap software infrastructure stocks to buy now.
On June 25, Cognyte Software Ltd. (NASDAQ:CGNT) announced it had entered into an agreement with a national security agency based in the Asia-Pacific region. The agreement is worth $5 million and is an extension of an already well-established strategic relationship between the two entities. Cognyte plays a crucial role in the agency’s existing operations and offers extensive support across its national security missions.
The agency assessed its changing needs and selected Cognyte to address two priorities in particular. The first one involves modernization of its existing infrastructure, and the second one relates to the expansion of the agency’s network intelligence functions in line with evolving requirements.
Cognyte’s CEO, Elad Sharon, said this development reflects the company’s strong leadership in an operationally complex market segment. He highlighted the company’s growth execution across different areas by stating:
“We’re executing on our growth strategy on every front: winning new customers, expanding within our installed base to grow our recurring revenue and translating that growth into expanding profitability through the operating leverage in our model. This deep relationship is a clear example of that momentum, and it reinforces our confidence in the trajectory ahead.”
The infrastructure update also improves scalability, performance and resilience, giving the agency a future-ready footing and setting it up to take advantage of Cognyte’s latest analytics and AI-powered capabilities.
Cognyte Software Ltd. (NASDAQ:CGNT) is a software-driven technology company that specializes in network and threat intelligence analysis. It provides decision and operational intelligence analysis through investigative analytics solutions. The company also offers professional services and SaaS subscriptions.
9. Five9 Inc. (NASDAQ:FIVN)
Five9 Inc. (NASDAQ:FIVN) is one of the best 11 small-cap software infrastructure stocks to buy now.
On June 23, Five9 Inc. (NASDAQ:FIVN) announced the launch of Voice AI Agents, which is the new generation of agentic self-service designed on a new and specialized architecture for the agentic era. It contains features of reasoning, taking action, and resolving client requests, and it helps businesses automate complex customer interactions. It also ensures seamless handoffs between live agents and AI.
These agents are based on a purpose-built architecture, which allows autonomous processes using coordinated orchestration of multiple AI agents. This architecture also allows task-specific agents of AI to work together across multi-step and complex customer experiences. The platform also offers reduced latency, multilingual voice experiences with management of background noise and interruption handling.
Secure tool integration allows AI agents to verify client identities, update client records, execute transactions, and service tasks across enterprise systems. It also facilitates context-aware handoffs between human agents and AI, while embedded guardrails, workflow verification and automated post-call AI assessments help businesses scale AI securely.
Central to the release is AI Agent Studio, which is a centralized environment for developing, deploying, monitoring, testing, and continuously improving these Agents. The platform includes embedded call testing, promotion of the environment, versioning, rollbacks, and post-call assessment features.
Five9 Inc. (NASDAQ:FIVN) is a contact center as a service (CCaaS) software provider that offers intelligent cloud-based solutions for contact centers. Its CX platform comprises an extensive suite of applications that facilitate various functions related to customer service, sales, and marketing. The platform delivers services such as virtual assistance, workflow automation, AI insights & summaries, and revenue execution.
8. Progress Software Corp. (NASDAQ:PRGS)
Progress Software Corp. (NASDAQ:PRGS) is one of the best 11 small-cap software infrastructure stocks to buy now.
On July 1, Oppenheimer reduced its target price on the stock from $57 to $50, while reaffirming an Outperform rating based on the company’s impressive performance during the second quarter. Despite the downward revision in the price target, the stock carries an upside potential of over 149%.
The firm noted that both topline and profitability figures came in above consensus estimates. It also acknowledged management’s operational discipline, which resulted in expense control and the resulting bottom-line outperformance.
Earlier that day, management reported more than $253 million in second-quarter revenue, compared to consensus forecasts of almost $243 million. The topline beat is attributed to persistent momentum across the company’s AI-enabled solutions, along with elevated demand for its product portfolio.
Earlier on June 30, Progress Software Corp. (NASDAQ:PRGS) disclosed that its Progress Chef platform now offers lifecycle management of enterprise and configuration features for NVIDIA DGX Spark. It allows IT teams to monitor, allocate, and handle the desktop-based AI supercomputer safely on a large scale.
The platform enables its engineering and IT teams to combine DGX Spark with the current infrastructure operations and automate major lifecycle stages. These include uniform configuration, controlled maintenance to orchestrate updates, issue response, system-wide visibility, governed automation, ongoing compliance, and lifecycle management.
Progress Software Corp. (NASDAQ:PRGS) is a software company that offers products for developing and managing AI-enabled applications, digital experiences, and management tools. Its product portfolio comprises OpenEdge, Chef, Agentic RAG, MOVEit, Automate MFT, and Sitefinity. It delivers solutions for project management, software development, programming, training, and other services.
7. Allot Ltd. (NASDAQ:ALLT)
Allot Ltd. (NASDAQ:ALLT) is one of the best 11 small-cap software infrastructure stocks to buy now.
On June 23, Allot Ltd. (NASDAQ:ALLT) revealed that it received authorization from its Board regarding a share buyback program, allowing the company to repurchase up to $40 million of its ordinary shares. This repurchase program shows the Board’s confidence in the company’s long-run growth strategy. The Company would be able to buy back shares opportunistically while extending capital towards other growth initiatives as well.
According to Eyal Harari, Chief Executive Officer of Allot, the share repurchase program reflects favorably on the company’s strategic and financial standing. He also cited consecutive quarters of growth over the past 12 months, where the company registered double-digit topline growth, along with continued improvements in its profitability and cash-generating ability. He further stated:
“We are confident in the momentum we are continuing to build. We believe repurchasing our shares is an attractive use of our excess capital, that allows us to create increased value for our shareholders, while we continue to invest in internal initiatives that will continue to drive Allot’s long-term growth.”
The buyback will be executed by the management from time to time, as it sees fit. It will be done through open market purchases, private negotiations, or by any other permitted methods.
Allot Ltd. (NASDAQ:ALLT) develops and sells network intelligence and security solutions for communication service providers and other enterprises. Through its Allot Secure Management platform, the company offers a comprehensive suite of end-to-end security management services. These include Allot NetworkSecure, Allot HomeSecure, Allot DNSecure, Allot BusinessSecure, and Allot Secure Cloud.
6. Pagaya Technologies Ltd. (NASDAQ:PGY)
Pagaya Technologies Ltd. (NASDAQ:PGY) is one of the best 11 small-cap software infrastructure stocks to buy now. On June 11, Texas Capital initiated its coverage of the stock. The firm estimated a target price of $27, which results in more than 48% upside potential. It also assigned a Buy rating to the stock.
Earlier on June 8, Pagaya Technologies Ltd. (NASDAQ:PGY) revealed that the company has expanded its long-standing collaboration with Upgrade. It brings AI-led credit decisioning of Pagaya to Upgrade’s Buy Now, Pay Later (BNPL) solution, Flex Pay. It signifies a major stride in the ongoing engagement between the two entities, expanding towards a new asset class besides personal loans.
With the integration of Pagaya into Upgrade’s point-of-sale offering, the company can expand its Flex Pay monthly payment options to a larger array of clients at the time of purchase. In line with this expansion, the initial focus will be on the travel merchants space, where Flex Pay has established itself as a trusted payment option for many of the world’s leading brands.
Moreover, Upgrade aims to leverage real-time underwriting solutions offered by Pagaya, allowing it to expand its seamless Flex Pay funding options to more clients across its travel partners’ network. According to Pagaya’s President, Sanjiv Das, the extended collaboration deepens the partnership beyond personal loans. He further stated:
“By extending our network across new asset classes, we are supporting Flex Pay as it continues to grow. This expansion is part of our strategy to extend our point-of-sale business towards more purpose-driven transactions.”
Pagaya Technologies Ltd. (NASDAQ:PGY) is a product-focused technology company that aims to cut down manual effort and improve the accuracy of business workflows. It leverages data science and proprietary AI-enabled technology to serve financial institutions, fintech companies, banks, and real estate service providers.
While we acknowledge the potential of PGY 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 PGY and that has 100x upside potential, check out our report about the cheapest AI stock.
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