In this article, we will take a look at some of the most profitable software stocks to invest in.
These days, with everything being driven by technology, everyone is seeking stocks that benefit most from artificial intelligence, automation, and cybersecurity advancements. We have seen how the software industry has repeatedly proven to be the backbone of not just one but many other industries, as it redefines how the overall economy operates and communicates.
Despite the technology sector’s short-term volatility, Terry Sandven, chief equity strategist with U.S. Bank Asset Management Group, remains confident about the sector’s long-term prospects. He believes companies pursue growth, and this growth is achieved through investments in technology, rather than through the recruitment of new people. As he states,
“Data fuels AI. Companies involved in chip design, data capture, storage & processing, software & analytics, security, and the electrification of data centers, seem particularly well-positioned for longer-term growth.”
The outperformance of the technology sector, primarily led by software, isn’t something hidden. A testament to its long-term outperformance is the finding by the report “S&P 500 Sector Performance Across Business Cycles: A Comprehensive Analysis over 65 years (1960-2025),” published by financial data science and analytics company PPBF bv in August 2025. The report analyzed S&P 500 sector performances over different business cycles over the last 65 years. The analysis indicates that technology, with an average return of 125.2%, outperformed and emerged as a leading sector during the expansionary phases.
Our Methodology
To compile our list of the 12 most profitable software stocks to invest in, we used the Finviz stock screener to filter for software stocks with a market capitalization of more than $2 billion that have reported an operating margin and a net profit margin of over 15%. From this pool, we shortlisted the top 12 stocks with the highest trailing twelve-month (TTM) net income. These are then ranked in ascending order according to their net income.
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).
12 Most Profitable Software Stocks to Invest In
12. Paychex, Inc. (NASDAQ:PAYX)
Net Income (TTM): $1.61 billion
Number of Hedge Fund holdings: 50
On October 6, 2025, Stephens analyst Charles Nabhan began coverage on Paychex, Inc. (NASDAQ:PAYX) with a new Hold rating, citing a blend of reasons, including the stock’s premium valuation. The analyst views this valuation as restricting potential upside, even though it is supported by the company’s high margin and free cash flow profile. Although the valuation appears fair, the risk–reward setup is viewed as neutral in these market conditions.
The analyst further highlights the current labor market’s sub-optimal state, which indicates declining major performance indicators and revised estimations, adding to his conservative stance. That’s not it. The company’s revenue model, particularly concerning hiring trends and customer base, still exhibits some degree of variability and thus limits the projections for the future.
What drives investors to take an interest in Paychex, Inc. (NASDAQ:PAYX) is its recent acquisition of Paycor, which the analyst believes could be the future catalyst. During the latest earnings call, management also highlighted the company’s position to achieve targeted Paycor revenue synergies and surpass initial cost synergy expectations.
Paychex, Inc. (NASDAQ:PAYX) is a New York-based provider of human capital management solutions (HCM). Founded in 1971, the company offers services such as payroll processing services, employee payment services, and retirement solutions, among others.
11. Fortinet, Inc. (NASDAQ:FTNT)
Net Income (TTM): $1.94 billion
Number of Hedge Fund holdings: 46
On Friday, October 10, 2025, Roger Boyd, an analyst at UBS, reiterated a Hold rating on Fortinet, Inc. (NASDAQ:FTNT).
Earlier, on October 7, 2025, the company announced its extended partnership with Armis, a California-based company specializing in cyber exposure management & security, which enables organizations to streamline their security programs and enhance cyber resilience.
On the announcement, John Whittle, Chief Operating Officer of Fortinet, stated:
“We deliver the industry’s most robust threat intelligence and advanced AI for security, backed by Fortinet’s AI patent portfolio—the largest in cybersecurity. Expanding our partnership with Armis will give customers unified visibility and integrated defense across their growing digital attack surfaces.”
While Armis offers an in-depth analysis of the assets connected to the network and identifies the risks surrounding them, Fortinet, Inc. (NASDAQ:FTNT) boasts the ability to advise on security protocols for at-risk assets and enforce policies. Together, these entities provide robust asset visibility, efficient management, and enforcement capabilities to help security teams benefit from a more proactive security posture.
Fortinet, Inc. (NASDAQ:FTNT) is a California-based provider of cybersecurity and various networking and security solutions. Founded in 2000, the company offers its products to enterprises, communication service operators, and government institutions.
10. Synopsys, Inc. (NASDAQ:SNPS)
Net Income (TTM): $2.00 billion
Number of Hedge Fund holdings: 66
On October 10, 2025, KeyBanc reiterated its ‘Overweight’ rating on Synopsys, Inc. (NASDAQ:SNPS) with an unchanged price target of $590, which implies a potential upside of nearly 35% from the current price. This optimism surrounds an in-depth evaluation of the company’s fiscal third-quarter results.
While expressing confidence in the company’s recent quarterly performance, the research firm noted that the IP business segment may not be entirely “broken,” with the road to recovery appearing somewhat uncertain. The firm meaningfully raised its FY26 operating margin and EPS guidance to fully incorporate margin accretion and cost synergies stemming from the Ansys acquisition.
In another development, according to the recent filings with the SEC, many institutional investors are increasing their stake in Synopsys, Inc. (NASDAQ:SNPS), including First American Bank, Sequoia Financial Advisors, and Montrusco Bolton Investments Inc. Polen Focus Growth Strategy has also initiated a new position in the company to benefit from what it calls a “great business.” This highlights increased investor confidence in the company.
Synopsys, Inc. (NASDAQ:SNPS) is a California-based provider of electronic design automation software products for integrated circuits. Incorporated in 1986, the company operates through two segments: Design Automation and Design IP.
9. Joint Stock Company Kaspi.kz (NASDAQ:KSPI)
Net Income (TTM): $2.10 billion
Number of Hedge Fund holdings: 33
On October 7, 2025, Mikhail Butkov, an analyst at Goldman Sachs, upgraded Joint Stock Company Kaspi.kz (NASDAQ:KSPI) to Buy from Neutral, while cutting the price target to $107 from $114, implying a potential upside of nearly 42% from the current price.
As the analyst notes, Joint Stock Company Kaspi.kz (NASDAQ:KSPI) has seen its share of turbulent phases this year, particularly due to regulatory costs surrounding its Marketplace and banking businesses, along with a prolonged period of elevated interest rates. With the stock falling 25% over the last twelve months, the analyst believes the company is trading at a “significant discount” compared to its 3-year forward earnings multiple average.
Separately, investors can look forward to deeper insights into the performance as soon as Joint Stock Company Kaspi.kz (NASDAQ:KSPI) hosts its third-quarter earnings call, scheduled for November 10, 2025. Overall, market sentiments appear to be in the company’s favour, as the one-year price target by Yahoo Finance offers a potential gain of 48%.
Joint Stock Company Kaspi.kz (NASDAQ:KSPI), headquartered in Almaty, the Republic of Kazakhstan, is a provider of payments, marketplace, and fintech solutions for both consumers and merchants. Founded in 2008, the company is committed to improving people’s lives through its innovative products.
8. Shopify Inc. (NASDAQ:SHOP)
Net Income (TTM): $2.35 billion
Number of Hedge Fund holdings: 69
On October 9, 2025, Benchmark reaffirmed its ‘Buy’ rating on Shopify Inc. (NASDAQ:SHOP) while raising the price target to $195.00 from $190.00, reflecting a potential upside of about 25%. This upward revision follows the company’s integration with OpenAI’s ChatGPT.
As per the integration framework, Shopify Inc. (NASDAQ:SHOP) merchants can now sell directly in ChatGPT through Instant Checkout. With more commerce platforms utilizing the AI service, the company benefits from an early advantage. The research firm highlights the company’s “unique agentic and fully composable commerce stack,” which employs versatile and scalable APIs.
The firm notes that Shopify Inc. (NASDAQ:SHOP) has the potential to expand its agentic backend architecture to enterprise merchants pursuing modular commerce solutions to power their AI-driven strategies. This ability differentiates the company from SaaS commerce peers and custom headless stacks.
Shopify Inc. (NASDAQ:SHOP) is a Canadian e-commerce technology company that offers various tools to different businesses. Incorporated in 2004, the company is committed to fostering a future of commerce.
7. Intuit Inc. (NASDAQ:INTU)
Net Income (TTM): $3.87 billion
Number of Hedge Fund holdings: 105
On October 16, 2025, Intuit Inc. (NASDAQ:INTU) announced its partnership with Aprio, a business advisory and accounting firm, that enables mid-market enterprises to scale faster and smarter. This attempt to combine the company’s innovative ERP solution, Intuit Enterprise Suite, with Aprio’s well-rounded approach to advisory and financial management services marks a “first-of-its-kind strategic partnership.”
As the needs of the business community become increasingly complex, Intuit Inc. (NASDAQ:INTU) is well-positioned to transform how businesses grow, empowering companies to operate seamlessly without the need to adopt expensive and outdated ERPs or manage numerous separate applications. Through this collaboration, the company can benefit from Aprio’s team of advisors, thereby facilitating businesses to receive tailored guidance at each stage of growth.
Ashley Still, executive vice president and general manager, mid-market, Intuit Inc. (NASDAQ:INTU) stated:
“We look forward to working with Aprio as they redefine the accounting profession, transforming client experiences with the adoption of next-generation technologies to better serve the thousands of businesses that rely on their acumen and advisory services to grow.”
Intuit Inc. (NASDAQ: INTU) is a California-based company that offers products and services, including financial management, payments and capital, and marketing solutions. Founded in 1983, the company operates in four segments: Global Business Solutions, Consumer, Credit Karma, and ProTax.
6. Automatic Data Processing, Inc. (NASDAQ:ADP)
Net Income (TTM): $4.08 billion
Number of Hedge Fund holdings: 61
On October 13, Jefferies reiterated its Hold rating on Automatic Data Processing, Inc. (NASDAQ:ADP), while maintaining a price target of $315.00, implying a potential upside of nearly 11%. With the company’s first-quarter fiscal 2025 results scheduled for October 29, the firm anticipates ADP to achieve consensus revenue and earnings per share expectations.
What’s noteworthy is that the company’s current estimates already capture the poor fourth-quarter Employer Services (ES) sales performance, as highlighted by Jefferies. The firm believes the company’s earlier EBIT margin guidance could become the basis of earnings per share (EPS) upside in the results.
Although Automatic Data Processing, Inc. (NASDAQ:ADP) has the potential for strong performance, Jefferies raised concerns about its weaker stock price performance. The company’s Professional Employer Organization (PEO) segment, which posted record-breaking sales in the fourth quarter, is expected to make a meaningful contribution to the results.
Automatic Data Processing, Inc. (NASDAQ:ADP), headquartered in Roseland, New Jersey, is a provider of cloud-based human capital management (HCM) solutions. Founded in 1949, the company operates through two segments, Employer Services and Professional Employer Organization (PEO).
5. Salesforce, Inc. (NYSE:CRM)
Net Income (TTM): $6.66 billion
Number of Hedge Fund holdings: 121
On October 16, Canaccord Genuity reiterated its ‘Buy’ rating on Salesforce, Inc. (NYSE:CRM) with an unchanged price target of $300, implying a potential upside of nearly 27% from the current price level. This optimism stems from what the firm calls the company’s “reimagined platform for the Agentic Enterprise,” citing improvements in data, agentic, and application solutions.
The financial services company highlighted the company’s enhanced sales capacity and extended commercial licensing options. What’s even more interesting is that Salesforce, Inc. (NYSE:CRM) anticipates annual recurring revenue (ARR) spend to increase due to the customers who have transitioned to the “Agentic Enterprise” model by three to four times, resulting in a potential multiplier effect of its “Agentforce” vision, as the firm notes.
While emphasizing management projects, Canaccord Genuity acknowledged that meaningful results could take around a year to materialize, with key indicators for these improvements appearing soon.
Salesforce, Inc. (NYSE:CRM) is a California-based provider of customer relationship management (CRM) technology. Incorporated in 1999, the company connects companies and customers together through its core offerings, including Agentforce, Data Cloud, Industries AI, and Slack.
4. Adobe Inc. (NASDAQ:ADBE)
Net Income (TTM): $6.96 billion
Number of Hedge Fund holdings: 104
On October 14, 2025, Adobe Inc. (NASDAQ:ADBE) officially launched Adobe LLM Optimizer, an enterprise application that enables enterprises to maintain relevance and credibility as consumers transition towards generative AI-powered interfaces. From assisting businesses in measuring AI-driven traffic to optimizing content and code and presenting business value, the all-new Adobe LLM Optimizer promotes solutions for Generative Engine Optimization (GEO).
As stated by Loni Stark, vice president of strategy and product, Adobe Experience Cloud,
“Adobe LLM Optimizer delivers immediate value by connecting onsite and offsite brand performance insights with automatic optimization actions, ensuring businesses can stand out in a rapidly changing landscape.”
There’s no doubt that AI-powered chat services and browsers have become a tool for everyone whenever they need to discover and research products. As the new data from Adobe Inc. (NASDAQ:ADBE) outlines, it’s crucial for all businesses to maintain a digital presence to avoid being left behind in this AI race.
Adobe Inc. (NASDAQ:ADBE), based in San Jose, California, is a technology company operating through Digital Media, Digital Experience, and Publishing and Advertising segments. The company’s core offerings include digital media, creative, and digital marketing solutions. Incorporated in 1982, the company is committed to transforming the world through digital experiences.
3. SAP SE (NYSE:SAP)
Net Income (TTM): $7.68 billion
Number of Hedge Fund holdings: 32
In a September 30 report, Barclays identified attractive entry points in European technology stocks that have demonstrated weakness, highlighting SAP SE (NYSE:SAP) as a well-positioned name amid current fears regarding the comparative performance of AI-driven peers in the United States. The firm believes that the relative underperformance in the third quarter could serve as a momentum catalyst for many European tech companies.
The bank reiterates its ‘Overweight’ rating on SAP SE (NYSE:SAP), anticipating another robust quarter with core earnings outperforming estimates and sustaining resilience in its cloud backlog.
Separately, the macroenvironment remains favorable, as several German proposals have already been submitted to the EU for developing multi-billion-euro data centers. Federal Digital Minister Karsten Wildberger remains hopeful that Germany will receive at least one of what will possibly be five gigafactories.
Sebastian Steinhäuser, a board member at SAP SE (NYSE:SAP), recently expressed concerns regarding what he calls “misplaced priorities in the German debate over artificial intelligence (AI).” The company’s executive claims that programs are needed that target not only small businesses and workshops but also large enterprises, highlighting the use of AI in day-to-day operations. To intensify competition, he notes that a national initiative for AI training is mandatory.
SAP SE (NYSE:SAP) is a German provider of enterprise application and business solutions offering SAP S/4HANA, SAP SuccessFactors, and SAP customer experience solutions, among others. Incorporated in 1972, the company is a global leader in enterprise solutions and business AI, facilitating companies across various industries to operate seamlessly.
2. Oracle Corporation (NYSE:ORCL)
Net Income (TTM): $12.44 billion
Number of Hedge Fund holdings: 124
On 14 October 2025, Oracle Corporation (NYSE:ORCL) unveiled its strategic vision at the Oracle AI World 2025 Keynote, a conference that highlighted the company’s partners’ allocation of over $1.5 billion to AI training and development.
Throughout the conference, there was one idea that kept stealing the spotlight: a focus on seamless AI experience across the company’s ecosystems. As Juan Loaiza, EVP at the Database Team, highlighted:
It’s important to understand AI is a huge focus for us in the database team. We have over 100 different projects going on in AI. We’re using AI throughout everything.
With billions pouring into AI architecture, a large part of Wall Street fears the chances of an “AI bubble.” In other words, there are concerns about the current hype surrounding AI-related stocks, which have led to their higher prices without a solid financial foundation. If the excitement dies down, Wall Street expects a considerable decline, advising caution and urging investors to assess AI companies before investing. Oracle has been one of the companies leading the investment race with some significant announcements made recently.
Oracle Corporation (NYSE:ORCL) is a Texas-based company that provides solutions for enterprise information technology environments. Incorporated in 1977, the company offers Oracle cloud SaaS, cloud-based industry solutions, Oracle Cloud license and on-premise license, and Oracle license support services.
1. Microsoft Corporation (NASDAQ:MSFT)
Net Income (TTM): $101.83 billion
Number of Hedge Fund holdings: 294
On October 16, Microsoft Corporation (NASDAQ:MSFT) announced the extension of its Dragon Copilot AI clinical assistant to incorporate advanced capabilities for nursing workflows and new partner integration features. This marks the first-ever commercially available ambient AI solution aimed at nursing staff. In addition to this, the tech giant also launched extensibility capabilities that facilitate external AI applications to integrate directly into Dragon Copilot.
As expressed by Mary Varghese Presti, CVP and Chief Operating Officer of Microsoft Health and Life Sciences,
“Microsoft continues to advance Dragon Copilot as a leading enterprise-wide AI clinical assistant for healthcare provider organizations — now adding support for specialized nursing workflows and an ecosystem of third-party AI extensions.”
In light of the recent positive analyst opinions, the market remains broadly optimistic about the company’s future, with the consensus median price target still indicating a 23% potential upside. On October 15, Bradley Sills, an analyst at Bank of America Securities, reiterated a “Buy” rating on Microsoft Corporation (NASDAQ: MSFT). The bullish tone resonates similarly to other analysts, including Morgan Stanley and BMO Capital, who see further upside potential.
Microsoft Corporation (NASDAQ:MSFT) is a Washington-based company operating through Productivity and Business Processes, Intelligent Cloud, and Personal Computing segments. Founded in 1975, the company provides software, services, devices, and solutions worldwide.
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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