The Death of Software Has Been Greatly Exaggerated
In recent years, the tech landscape has been buzzing with claims about the potential demise of software, particularly in light of rapidly advancing artificial intelligence (AI). However, experts assert that the death of software is far from imminent. Analyst Gil Luria from D.A. Davidson recently emphasized that while we are in the third year of the AI shift, the signs of a software apocalypse remain absent.
The Reality Check
Luria observes a critical shift in the software industry — the hesitance of businesses to fully embrace software solutions. This reluctance stems from a narrative of fear that suggests AI might replace traditional software. “The biggest impact has been on narrative and scared customers unwilling to commit,” he noted. Yet, as companies begin to realize that neither they nor their software providers have been rendered obsolete by AI, this cautious sentiment appears to be changing.
A Return of Confidence
As the paralyzing effects of fear dissipate, analysts from firms like D.A. Davidson, Piper Sandler, and Truist Securities have identified key figures likely to lead the software recovery. Common among these picks is a focus on companies that provide the underlying infrastructure for advanced AI systems. These firms not only showcase resilience but are also poised for substantial growth.
Spotlight on Key Players
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Commvault (CVLT) is one of Luria’s top recommendations, projected to see a 50%+ upside with a target price of $220. The basis of this optimism lies in sustained momentum and an anticipated rebound in profit margins.
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Manhattan Associates (MANH), which specializes in supply chain and retail software, is viewed as a compelling choice due to its impressive return on invested capital and ambitions for subscription growth, with a target price set at $250.
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Zeta Global (ZETA) is another notable name, leveraging the opportunity created by the modernization of marketing technology. Analysts anticipate a target of $29 for the company as it replaces legacy systems.
- Box (BOX) is evolving via its "Enterprise Advanced" upgrades, targeting $45, while Datadog (DDOG), touted as the "complete Observability platform" in AI environments, has a forecasted value of $225.
Gen Z and Infrastructure Plays
Piper Sandler’s James Fish places considerable emphasis on so-called "Gen Z" winners and promising infrastructure ventures. His picks include:
- Rubrik (RBRK), currently transitioning to a SaaS model with a projected $75 price.
- Nutanix (NTNX), targeting $50 as it locks in market share from competitors like VMware.
- Axon (AXON), focusing on evolving public safety technology, is anticipated to reach $563.
The Shift Towards Consumption-Based Pricing
Amid increasing skepticism about traditional license-based pricing models, Truist Securities’ Terry Tillman offers a refreshing perspective. The rise of autonomous AI agents is not a threat but rather an evolution in software consumption. These agents, operating continuously, mark a notable shift to consumption-based pricing models.
“As workflows evolve from human-initiated tasks to autonomous agents executing at scale, billing tied to usage becomes the most logical way to capture value,” Tillman states. AI’s capacity to operate around the clock enables companies to stack billable events, potentially compensating for any decline in conventional software subscriptions.
R&D and Daily ROI
Despite the winds of change, Tillman identifies that successful vendors must demonstrate daily ROI, invest rigorously in R&D, and develop transparent tools for metering and governance.
Among these companies, ServiceNow (NOW) stands out with a price projection of $781, while JFrog (FROG), navigating mid-transition stages, is pegged at $65. Snowflake (SNOW) carries the reputation of a pioneer in a fully consumption-driven business model, with a target value of $220.
The overarching narrative is clear: as AI adoption escalates, the volume of processed data and executed transactions is expected to outweigh any drop in human seat licenses.
The Rationalization of Values
As we look toward 2026, it’s not that investors are rekindling their love for software; rather, they are acting on rational valuations amid a landscape that is steadily recovering. Customer hesitation that once gripped the market appears to be lessening, revealing that the anticipated "business killers" have yet to materialize.
In this evolving narrative, the software realm stands not on the brink of extinction but in a robust state of transformation, reaffirming its vital role in the future of technology.
