After spending much of the past two years in the market’s penalty box, software stocks are staging a quiet but meaningful comeback in 2026. Fears that artificial intelligence would cannibalize traditional software models once dominated investor sentiment. Today, that narrative is shifting. Wall Street is increasingly convinced that AI isn’t destroying software — it’s reshaping it, and in many cases, making the strongest platforms even more valuable.
Early in the AI transition, uncertainty froze customer budgets. Enterprises delayed renewals, paused expansions, and questioned whether existing software would still matter in an AI-first world. But as the dust settles, investors are realizing something important: software didn’t disappear — it became infrastructure. And infrastructure is where durable returns are built.
Why the “AI Kills Software” Narrative Is Fading
According to analysts, if AI were truly going to wipe out large segments of enterprise software, the damage would already be visible. Instead, customer hesitation — not revenue collapse — defined the past two years. As confidence returns, deferred spending is reentering the market, especially toward vendors that sit closest to data, security, automation, and mission-critical workflows.
What’s emerging is a new phase of the AI cycle: one where software enables AI rather than competes with it. That distinction matters for investors positioning for 2026.
Infrastructure Software Leads the Charge
Analysts at multiple firms are converging on a similar conclusion: the winners of 2026 will be software companies that form the backbone of AI-powered enterprises.
At D.A. Davidson, top conviction names focus on resilience, recurring revenue, and AI-adjacent demand:
- Commvault stands out as a flagship recovery story, benefiting from growing demand for cyber resilience and data recovery as AI expands attack surfaces. Analysts see substantial upside as margins rebound and AI-driven data growth accelerates.
- Manhattan Associates is gaining traction as enterprises modernize logistics and retail operations, leaning into subscription-driven growth and high returns on invested capital.
- Zeta Global is capitalizing on the replacement of legacy marketing stacks, using AI-driven personalization to win share.
Additional infrastructure-oriented plays include Box, which is monetizing higher-tier enterprise upgrades, and Datadog, whose monitoring tools are becoming essential as AI workloads add complexity to modern systems.
Gen-Z Software and the Next Adoption Curve
Piper Sandler analysts highlight what they call the “next-generation software winners” — platforms that entered the AI era already cloud-native and consumption-focused:
- Rubrik, fresh off its SaaS transition, is benefiting from heightened focus on data protection.
- Nutanix continues to take share as enterprises seek alternatives to legacy virtualization stacks.
- Axon is expanding beyond body cameras into AI-enabled drones and analytics, supported by sticky recurring revenue.
These companies reflect a broader trend: buyers are prioritizing outcomes and resilience, not just licenses.
The Pricing Shift That Changes Everything
One of the biggest misconceptions around AI and software is pricing. Bears argue that if AI boosts productivity, companies will need fewer software seats. That’s increasingly missing the point.
Analysts note that agentic AI — autonomous software agents that operate 24/7 — flips the economic model. Instead of seat-based pricing tied to human users, vendors are moving toward usage-based and consumption-driven billing, where revenue scales with activity, data processed, and workflows executed.
This shift strongly favors platforms already built for metered usage:
- ServiceNow is emerging as a leader as enterprises automate entire processes with AI agents.
- JFrog benefits as AI increases the frequency of builds, deployments, and updates.
- Snowflake remains the gold standard for consumption-based data economics, where AI workloads directly translate into higher usage.
Unlike human employees, AI agents don’t clock out — which means billable activity can compound continuously, supporting long-term revenue growth.
Why Valuations Finally Make Sense
Another reason Wall Street is leaning back into software stocks in 2026 is valuation discipline. Many high-quality names spent years de-rating, resetting expectations and balance sheets. Today, investors see a rare alignment: reasonable valuations, improving demand visibility, and AI-driven expansion opportunities.
This isn’t a speculative rebound fueled by hype. It’s a selective rotation into companies with measurable ROI, strong cash flow, and platforms that enterprises can’t easily replace.
Software Isn’t Back — It Never Left
Wall Street isn’t buying software stocks in 2026 because the AI buzz returned. It’s buying because software has proven itself indispensable to the AI economy. The feared “business killers” haven’t arrived. Instead, spending is shifting toward platforms that power data, security, automation, and intelligence at scale.
For investors, the message is clear: the next phase of the AI cycle runs through software, and the companies enabling that transition are quietly reclaiming center stage.