On February 18, Morningstar published a report on why small-cap stocks should not be ignored by investors. The firm highlighted that, across major markets worldwide, these stocks have underperformed large- and mid-cap indexes over the past decade. There have been a few exceptions, such as India and Australia, but overall performance has been comparatively lackluster. Despite this, the report underlined the possibility of valuation-driven opportunities emerging within the small-cap universe.
Navigating the potential for global small-cap stocks, Morningstar’s Chief European Markets Strategist, Michael Field, stated:
“The valuation gap between large and small is even bigger in Europe than in the U.S. And the fact that there’s some momentum there – people seem to be buying into the small-cap story, seem to buying into the long-term longevity and health of the economy as a whole – is a pretty good sign for 2026.”
Across the small-cap universe, software companies are known for their immense growth potential, which can occur rapidly. Many such businesses specialize within specific niches, which keeps them on the radar for potential bolt-on acquisitions by larger players. This is exactly where the value is unlocked for investors.
Separately, on February 12, Deloitte shared its 2026 outlook for the global software industry. The firm expects 2026 to be characterized by AI adoption and a shift towards AI-first products, likely making the landscape highly competitive. The firm noted that many larger players within the software space will extend resources to become “full-stack, end-to-end agentic platforms” through strategic acquisitions. Hence, there will be some compelling opportunities for investors across select areas.
With that background, let’s explore our 9 Small-Cap Software Infrastructure Stocks With Highest Upside Potential.
Copyright: welcomia / 123RF Stock Photo
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. Next, we identified stocks with at least 45% upside potential according to TipRanks consensus, as of February 17 closing. Finally, we selected 9 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 427.7% since May 2014, beating its benchmark by 264 percentage points (see more details here).
9. Allot Limited (NASDAQ:ALLT)
Number of Hedge Fund Holders: 15
Upside Potential: 45.6%
Allot Limited (NASDAQ:ALLT) is one of the 9 small-cap software infrastructure stocks with the highest upside potential.
On January 12, Cantor Fitzgerald began coverage of Allot Limited (NASDAQ:ALLT), assigning an Overweight rating and a $15 price target. This resulted in an upside potential of more than 49% at the prevailing level.
The firm highlighted the company’s transition towards a security-centric consumer model, supported by the growing contribution of Security as a Service and improving financial metrics. While the company continues to benefit from strong business momentum and telecom carrier partnerships, its valuation remains materially below comparable companies, leaving room for potential upside and multiple re-rating.
On January 13, Allot Limited (NASDAQ:ALLT) announced that Compax Venture will deploy the company’s NetworkSecure and OffNetSecure solutions to support the launch of MVNOs, offering integrated cyber protection services. The firm believes this implementation will enable brands and communities using Compax’s platform to provide subscribers with network-based cybersecurity and content filtering protection.
Allot Limited (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.
8. LiveRamp Holdings (NYSE:RAMP)
Number of Hedge Fund Holders: 26
Upside Potential: 47.7%
LiveRamp Holdings (NYSE:RAMP) is one of the 9 small-cap software infrastructure stocks with the highest upside potential.
On February 6, the price target on LiveRamp Holdings (NYSE:RAMP) was reduced from $45 to $35 by DA Davidson analyst Clark Wright, who maintained a Buy rating on the stock. Despite this downward revision, the forecast yields an upside potential of almost 43%.
Wright reflected on the company’s quarterly performance, which exceeded forecasts at both revenue and earnings levels. However, the management maintained its 2026 guidance amid some project-related expenses that fell into the fourth quarter. Besides that, management also sees a softer marketplace growth compared with their prior expectations.
On February 3, the price target on LiveRamp Holdings (NYSE:RAMP) was reduced from $53 to $38 by Mark Zgutowicz from Benchmark. The analyst maintained his Buy rating on the stock, with a revised upside potential of almost 55%.
Zgutowicz shared his topline and adjusted EBITDA growth forecasts for the company. Based on conservative estimates, he has projected compound annual growth rates of 6.7% and 10.3% for both metrics, respectively.
LiveRamp Holdings (NYSE:RAMP) is a technology company that provides a privacy-focused data collaboration platform. It offers the LiveRamp Data Collaboration platform that allows businesses to activate, unify, and manage customer data over multiple marketing mediums. The company ensures the security and privacy of consumers’ data in this context.
7. Payoneer Global (NASDAQ:PAYO)
Number of Hedge Fund Holders: 42
Upside Potential: 63.6%
Payoneer Global (NASDAQ:PAYO) is one of the 9 small-cap software infrastructure stocks with highest upside potential.
On February 17, Payoneer Global (NASDAQ:PAYO) announced plans to introduce stablecoin capabilities that will be directly integrated into its platform through a partnership with Bridge. The company believes this partnership will unlock new capabilities for businesses to securely receive, hold, and send stablecoins as part of their routine operations. The goal is to simplify international payments and facilitate flexible fund management.
Back on January 29, Payoneer Global (NASDAQ:PAYO) had also introduced its new payment collection capabilities in Indonesia while enhancing its local services across Mexico. The aim of these upgrades is to allow customers to transact more efficiently with buyers and e-commerce platforms within local markets. The company stated that it plans to continue expanding these capabilities during 2026, targeting high-growth regions across Latin America and the Asia Pacific.
Payoneer Global (NASDAQ:PAYO) is a financial technology company that allows individuals, enterprises, and freelancers to exchange cross-border payments. It offers multi-currency accounts to users for receivables, payables, fund management, working capital, and prepayment needs. The company facilitates international commerce by serving small and medium-sized enterprises worldwide.
6. Flywire Corporation (NASDAQ:FLYW)
Number of Hedge Fund Holders: 31
Upside Potential: 70.5%
Flywire Corporation (NASDAQ:FLYW) is one of the 9 small-cap software infrastructure stocks with the highest upside potential.
On January 20, the price target on Flywire Corporation (NASDAQ:FLYW) was increased from $16 to $17 by Truist analyst Matthew Coad, who maintained his Buy rating. His revision was part of the fourth-quarter earnings preview for the FinTech segment and led to upside potential of almost 58%. Coad continues to hold a positive stance on FinTech for 2026, while noting that some companies could reset expectations below their initial guidance.
On January 16, Flywire Corporation (NASDAQ:FLYW) was upgraded from Equal Weight to an Overweight rating by Stephens analyst Charles Nabhan. In the process, he also raised the price target from $17 to $19, yielding an upside of more than 76%.
Nabhan pointed towards a more conducive higher education backdrop that bodes well for the company. He also reflected on some growth drivers for 2026, including the stock’s low valuation and recent periods of outperformance.
Flywire Corporation (NASDAQ:FLYW) is a payments enablement and software company that streamlines both cross-border and domestic transactions. It offers vertical-specific software that caters to the payment needs of B2B users across different segments. The platform enables payments across different currencies, types, and payment options.
5. Progress Software Corporation (NASDAQ:PRGS)
Number of Hedge Fund Holders: 25
Upside Potential: 74.8%
Progress Software (NASDAQ:PRGS) is one of the 9 small-cap software infrastructure stocks with highest upside potential.
On January 22, the price target on Progress Software (NASDAQ:PRGS) was increased from $54 to $60 by Citi analyst Fatima Boolani. She maintained her Buy rating on the stock with more than 71% upside potential.
Boolani’s revision came on the heels of the company’s fourth-quarter announcement, which reported impressive earnings and cash flows. She sees strong momentum for the company during the coming year.
On January 15, the price target on Progress Software (NASDAQ:PRGS) was reduced from $75 to $70 by DA Davidson analyst Lucky Schreiner, who maintained his Buy rating on the stock. Following this downward revision, the forecast still carries an impressive upside of almost 100%.
Schreiner conducted a sales check on Progress Software (NASDAQ:PRGS) to assess the impact of ongoing fears related to AI’s potential disruption. The check indicates that customers still regard the company’s products as mission-critical, with limited interest in alternatives. Despite trading at historically low valuation multiples at present, the analyst views potential M&A opportunities as positive catalysts for the stock.
Progress Software (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.
4. Five9 Incorporated (NASDAQ:FIVN)
Number of Hedge Fund Holders: 36
Upside Potential: 78.4%
Five9 Incorporated (NASDAQ:FIVN) is one of the 9 small-cap software infrastructure stocks with highest upside potential.
On January 15, the price target on Five9 Incorporated (NASDAQ:FIVN) was reduced from $30 to $26 by Morgan Stanley analyst Elizabeth Porter, who maintained an Equal Weight rating on the stock. Following her revision, the stock still offers an upside of more than 59%.
Porter highlighted that Application SaaS companies delivered weaker returns in 2025 relative to both the broader software segment and the underlying technology vertical. She noted that AI-related risks may not turn out to be as intense as anticipated, which leads to a more favorable outlook for the Application SaaS segment. However, the firm remains cautious and selective amid limited signs of increased software spending.
On January 12, Barclays analyst Raimo Lenschow reduced his target price on Five9 Incorporated (NASDAQ:FIVN) from $29 to $25. The analyst maintained an Overweight rating on the stock with an upside potential of more than 53%.
Lenschow’s rating is based on Barclays’ revisions across the Software segment in line with its 2026 outlook. The firm noted steady Macro and IT spending, depressed valuations, and the sector remaining out of favor at present.
Five9 Incorporated (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.
3. Appian Corporation (NASDAQ:APPN)
Number of Hedge Fund Holders: 32
Upside Potential: 83.7%
Appian Corporation (NASDAQ:APPN) is one of the 9 small-cap software infrastructure stocks with the highest upside potential.
On January 27, Steve Enders from Citi maintained his Buy rating on Appian Corporation (NASDAQ:APPN). The analyst forecasted a target price of $48, which leads to an upside potential of more than 108%. He also placed Appian Corporation (NASDAQ:APPN) on an “upside 90-day catalyst watch.”
Enders reflected on the company’s fourth quarter results and 2026 guidance, which indicate continued strength across the federal segment. He believes this setup presents a compelling risk/reward opportunity for investors.
Back on January 12, Appian Corporation (NASDAQ:APPN) was upgraded from an Equal Weight to an Overweight rating by Morgan Stanley analyst Sanjit Singh. He forecasted a $45 price target, yielding upside potential of more than 95%.
Singh’s rating revision is based on his belief that the market has a misconception about the company. He anticipates growth in mid-teens amid customer adoption of the company’s AI-linked subscription tiers, along with enhanced sales productivity.
Appian Corporation (NASDAQ:APPN) is a global cloud-based platform-as-a-service (PaaS) provider. It allows enterprises to design and automate business processes through an integrated automation platform. The platform encompasses various features, including AI, data fabric, and process automation & mining.
2. Pagaya Technologies (NASDAQ:PGY)
Number of Hedge Fund Holders: 38
Upside Potential: 137.8%
Pagaya Technologies (NASDAQ:PGY) is one of the 9 small-cap software infrastructure stocks with the highest upside potential.
On February 10, the price target on Pagaya Technologies (NASDAQ:PGY) was reduced from $48 to $33 by Benchmark analyst Mark Palmer. He maintained his Buy rating on the stock with a revised upside potential of more than 168%.
Palmer referred to the recent selloff by investors, which he described as “violent and largely disconnected” from management’s expectations regarding the business. While its first-quarter guidance was softer-than-expected, the management ensured that there weren’t any operational slippages or credit stress faced by the company.
On February 10, David Scharf from Citizens JMP lowered his target price for Pagaya Technologies (NASDAQ:PGY) from $35 to $22. The analyst maintained an Outperform rating on the stock with almost 79% upside potential from the prevailing level.
Scharf reflected on the management’s guidance for 2026, indicating a measured growth forecast linked with credit tightening. However, he also noted management’s views on potential entry points arising from near-term market noise.
Pagaya Technologies (NASDAQ:PGY) is a product-focused technology company that aims to cut down manual effort and improve the accuracy in business workflows. It leverages data science and proprietary AI-enabled technology to serve financial institutions, fintech companies, banks, and real estate service providers.
1. PowerFleet Incorporated (NASDAQ:AIOT)
Number of Hedge Fund Holders: 23
Upside Potential: 185.0%
PowerFleet Incorporated (NASDAQ:AIOT) is one of the 9 small-cap software infrastructure stocks with the highest upside potential.
On February 9, PowerFleet Incorporated (NASDAQ:AIOT) announced results for the third quarter. The company reported topline figures of $113.5 million, compared with consensus estimates of $111.69 million.
CEO Steve Towe stated:
“This was the Q1 in which year-over-year results reflect the total combined businesses, and PowerFleet Incorporated (NASDAQ:AIOT) delivered another quarter of solid execution across the organization. Total revenue reached a company high of $113.5M, driven by strong recurring revenue growth reflecting an 11% year-over-year increase in high value services which now represents 80% of total revenue.”
Back on January 9, Northland Securities assigned an Outperform rating to PowerFleet Incorporated (NASDAQ:AIOT), with a target price of $10. This results in a lucrative upside potential of almost 164%.
The firm also labeled PowerFleet Incorporated (NASDAQ:AIOT) as a “Top Pick for 2026,” attributing this to the company’s ongoing execution of post-combination strategy. It also reflected on the bullish sentiment around the stock, backed by new logo wins, AI Video growth, and success in cross-selling opportunities. The firm views the stock as highly underappreciated, with expectations of a re-rating.
PowerFleet Incorporated (NASDAQ:AIOT) is a SaaS provider that specializes in artificial intelligence-of-things (AIoT). It offers the Unity platform, which is part of its Unity solutions portfolio. The platform helps integrate AIoT devices and business systems with a data highway that generates AI-enabled insights for customers. The company also provides SaaS-based unity modules that include vehicle, video, and in-warehouse IoT solutions.
While we acknowledge the potential of AIOT as an investment, 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 AIOT and that has 100x upside potential, check out our report about the cheapest AI stock.
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