Investment Opportunities in the SaaS Sector
Written by Emily J. Thompson, Senior Investment Analyst
Updated: Mar 29 2026
0mins
Should l Buy NOW?
Source: NASDAQ.COM
- Market Growth Potential: Thoma Bravo forecasts a 20% annual growth rate for the SaaS sector over the next few years, indicating that despite current valuation declines, fundamentals are improving, potentially offering a favorable buying opportunity for investors.
- ServiceNow's Competitive Edge: As a core tool for IT departments, ServiceNow continues to grow at a 20% rate through its generative AI suite, Now Assist, and the newly launched Control Tower platform, with an attractive forward P/E of 25 times, highlighting its valuation appeal.
- Salesforce's Market Positioning: Salesforce's leadership in customer relationship management is bolstered by its Data 360 feature, which integrates third-party data; despite a forward P/E of just 14 times, it is expected to achieve stable double-digit revenue growth, showcasing its potential in the AI era.
- Workday's Value Rebound: Although Workday's stock has dropped about 40% year-to-date, its forward P/E is only 12 times, and it maintains low double-digit revenue growth, suggesting that its investments in AI applications may lay the groundwork for future recovery.
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Analyst Views on NOW
Wall Street analysts forecast NOW stock price to rise
32 Analyst Rating
30 Buy
2 Hold
0 Sell
Strong Buy
Current: 88.310
Low
172.00
Averages
222.81
High
263.00
Current: 88.310
Low
172.00
Averages
222.81
High
263.00
About NOW
ServiceNow, Inc. provides an artificial intelligence (AI) platform for business transformation. The Company’s AI platform connects people, processes, data, and devices to increase productivity and maximize business outcomes. Its intelligent platform, the Now Platform, is a cloud-based solution that helps enterprises and organizations across public and private sectors digitize workflows. The workflow applications built on the Now Platform are organized into four primary areas: Technology, CRM and Industry, Core Business and Creator. Its products include IT Service Management, IT Operations Management, HR Service Delivery, ServiceNow AI Agents, AI Experience, Build Agent, ServiceNow AI Control Tower, AI Agent Fabric, RaptorDB, Workflow Data Fabric, Workplace Service Delivery, ServiceNow Platform Encryption, Telecommunications Service Operations Management, and others. The Company also offers identity security, helping organizations secure access across the enterprise.
About the author
Emily J. Thompson
Emily J. Thompson, a Chartered Financial Analyst (CFA) with 12 years in investment research, graduated with honors from the Wharton School. Specializing in industrial and technology stocks, she provides in-depth analysis for Intellectia’s earnings and market brief reports.
Software Stocks Surge on Strong Earnings Reports
- Sector Recovery: Strong earnings reports from several software companies have rejuvenated sentiment across the software sector, particularly after Atlassian raised its annual forecast, leading to significant stock price increases for peers like Salesforce and ServiceNow.
- Twilio's Positive Outlook: Twilio reported first-quarter revenue that exceeded expectations and raised its forecast, with the CEO highlighting artificial intelligence as a key catalyst, which further bolstered market confidence in software stocks.
- Market Response: Following a valuation reset, the market is optimistic about the recovery of software stocks, especially as high-growth companies like Datadog and ServiceNow lead the rebound, indicating that enterprise software remains structurally advantageous despite short-term macro turbulence.
- SentinelOne Volatility Analysis: SentinelOne's stock has experienced 19 moves greater than 5% in the past year, and while it has risen 1.1% year-to-date, it still trades 27.2% below its 52-week high, reflecting cautious optimism about its future performance.
See More
Software Stocks Surge on Strong Earnings and Optimistic Forecasts
- Strong Performance in Enterprise Software: Atlassian's stock surged after raising its annual forecast, which in turn lifted peers like Salesforce and ServiceNow, indicating positive sentiment in the software-as-a-service (SaaS) sector and potential for a rebound in an underperforming market.
- Twilio Beats Earnings Expectations: Twilio reported first-quarter revenue that exceeded estimates and raised its forecast, with the CEO highlighting artificial intelligence as a catalyst, further boosting market confidence in software stocks.
- Cloudflare and Shopify Gains: Cloudflare's stock rose by 3.4% and Shopify's by 3.5%, reflecting investor optimism in the software sector, despite Shopify's 19.7% decline year-to-date, indicating ongoing interest in its future potential.
- Market Sentiment Recovery: As geopolitical tensions ease, investors are returning to high-growth tech stocks, particularly those with high-margin subscription revenue and the potential for integrating generative AI, which may lay the groundwork for a recovery in software stocks.
See More
Software Stocks Surge on Strong Earnings Reports
- Sector Recovery: Following strong earnings reports from several software companies, the software sector saw a broad increase, particularly with Atlassian's stock surging after it raised its annual forecast, which in turn boosted peers like Salesforce and ServiceNow, reflecting positive sentiment in the software-as-a-service (SaaS) space.
- Twilio's Strong Performance: Twilio reported first-quarter revenue that exceeded estimates and raised its forecast, with the CEO highlighting artificial intelligence as a catalyst, which further bolstered market confidence in software stocks, especially after a prolonged period of underperformance.
- Dynatrace's Volatility: Dynatrace's stock jumped 2.9%, despite having experienced 11 moves greater than 5% in the past year, indicating that today's increase is significant to the market, although it does not fundamentally alter perceptions of the business, showcasing investor interest in high-quality stocks.
- Market Sentiment Improvement: As geopolitical tensions eased, investors returned to growth-oriented companies like Microsoft and ServiceNow, which offer high-margin subscription revenue, suggesting a recovery in market confidence towards the software sector that could lay the groundwork for future growth.
See More
Software Stocks Surge on Strong Earnings and Positive Forecasts
- Earnings Boost: Atlassian's raised annual forecast led to a significant stock surge, lifting peers like Salesforce and ServiceNow, indicating strong recovery potential in the software-as-a-service (SaaS) sector.
- Twilio's Strong Performance: Twilio reported first-quarter revenue exceeding estimates and raised its forecast, with the CEO highlighting artificial intelligence as a catalyst, further boosting market confidence in software stocks.
- Market Sentiment Recovery: The rebound in the software sector after a valuation reset suggests that enterprise software is still viewed as a core structural winner, attracting investor interest despite short-term macroeconomic volatility.
- Sprout Social Volatility: Although Sprout Social's stock has dropped 37.8% year-to-date, today's rise indicates a renewed market confidence in its future performance, prompting investors to consider its long-term value.
See More
ServiceNow Faces AI Transition Challenges and Opportunities
- Stock Price Decline: ServiceNow's stock plummeted 18% following its latest earnings report, now down 62.4% from its all-time high, reflecting investor concerns over AI's impact on the software sector, which may pressure future revenues and profits.
- Strong Revenue Growth: Despite challenges, ServiceNow reported a 22% year-over-year revenue increase, with remaining contract obligations growing by 25%, indicating robust market demand and a solid business foundation among large enterprises.
- AI Control Tower Launch: In May 2025, ServiceNow unveiled its AI Control Tower, enabling enterprises to manage AI agents, enhancing its competitiveness in the AI era, and demonstrating foresight by preparing the product before the surge in AI agent usage.
- Subscription Model Adjustment: Management noted that approximately 50% of new contracts are now sold on a usage basis rather than traditional seat subscriptions, a shift that could help ServiceNow sustain growth in the AI era and mitigate revenue risks associated with increased efficiency.
See More
ServiceNow Shares Decline Amid AI Concerns
- Stock Decline: ServiceNow's shares fell by 15.5% last month, despite beating first-quarter estimates, indicating investor concerns about the sustainability of its business model amid broader software stock fears.
- AI Model Impact: The stock initially dropped in the second week of April following the announcement of its Mythos AI model, which was deemed too powerful and potentially exploitable, highlighting challenges in the AI sector for the company.
- Rating Downgrade: UBS downgraded ServiceNow from 'Buy' to 'Neutral', citing diminishing competitive advantages in application software, which contributed to further stock declines and reflected market concerns over budget pressures.
- Margin Pressure: Although first-quarter results met expectations, gross margins fell from 79% to 75%, indicating ongoing margin pressure as the company transitions from a seat-based model to AI products, which may affect future profitability.
See More
Software Stocks Surge on Strong Earnings Reports
- Sector Recovery: Strong earnings reports from several software companies have rejuvenated sentiment across the software sector, particularly after Atlassian raised its annual forecast, leading to significant stock price increases for peers like Salesforce and ServiceNow.
- Twilio's Positive Outlook: Twilio reported first-quarter revenue that exceeded expectations and raised its forecast, with the CEO highlighting artificial intelligence as a key catalyst, which further bolstered market confidence in software stocks.
- Market Response: Following a valuation reset, the market is optimistic about the recovery of software stocks, especially as high-growth companies like Datadog and ServiceNow lead the rebound, indicating that enterprise software remains structurally advantageous despite short-term macro turbulence.
- SentinelOne Volatility Analysis: SentinelOne's stock has experienced 19 moves greater than 5% in the past year, and while it has risen 1.1% year-to-date, it still trades 27.2% below its 52-week high, reflecting cautious optimism about its future performance.
See More
Software Stocks Surge on Strong Earnings and Optimistic Forecasts
- Strong Performance in Enterprise Software: Atlassian's stock surged after raising its annual forecast, which in turn lifted peers like Salesforce and ServiceNow, indicating positive sentiment in the software-as-a-service (SaaS) sector and potential for a rebound in an underperforming market.
- Twilio Beats Earnings Expectations: Twilio reported first-quarter revenue that exceeded estimates and raised its forecast, with the CEO highlighting artificial intelligence as a catalyst, further boosting market confidence in software stocks.
- Cloudflare and Shopify Gains: Cloudflare's stock rose by 3.4% and Shopify's by 3.5%, reflecting investor optimism in the software sector, despite Shopify's 19.7% decline year-to-date, indicating ongoing interest in its future potential.
- Market Sentiment Recovery: As geopolitical tensions ease, investors are returning to high-growth tech stocks, particularly those with high-margin subscription revenue and the potential for integrating generative AI, which may lay the groundwork for a recovery in software stocks.
See More
Software Stocks Surge on Strong Earnings Reports
- Sector Recovery: Following strong earnings reports from several software companies, the software sector saw a broad increase, particularly with Atlassian's stock surging after it raised its annual forecast, which in turn boosted peers like Salesforce and ServiceNow, reflecting positive sentiment in the software-as-a-service (SaaS) space.
- Twilio's Strong Performance: Twilio reported first-quarter revenue that exceeded estimates and raised its forecast, with the CEO highlighting artificial intelligence as a catalyst, which further bolstered market confidence in software stocks, especially after a prolonged period of underperformance.
- Dynatrace's Volatility: Dynatrace's stock jumped 2.9%, despite having experienced 11 moves greater than 5% in the past year, indicating that today's increase is significant to the market, although it does not fundamentally alter perceptions of the business, showcasing investor interest in high-quality stocks.
- Market Sentiment Improvement: As geopolitical tensions eased, investors returned to growth-oriented companies like Microsoft and ServiceNow, which offer high-margin subscription revenue, suggesting a recovery in market confidence towards the software sector that could lay the groundwork for future growth.
See More
Software Stocks Surge on Strong Earnings and Positive Forecasts
- Earnings Boost: Atlassian's raised annual forecast led to a significant stock surge, lifting peers like Salesforce and ServiceNow, indicating strong recovery potential in the software-as-a-service (SaaS) sector.
- Twilio's Strong Performance: Twilio reported first-quarter revenue exceeding estimates and raised its forecast, with the CEO highlighting artificial intelligence as a catalyst, further boosting market confidence in software stocks.
- Market Sentiment Recovery: The rebound in the software sector after a valuation reset suggests that enterprise software is still viewed as a core structural winner, attracting investor interest despite short-term macroeconomic volatility.
- Sprout Social Volatility: Although Sprout Social's stock has dropped 37.8% year-to-date, today's rise indicates a renewed market confidence in its future performance, prompting investors to consider its long-term value.
See More
ServiceNow Faces AI Transition Challenges and Opportunities
- Stock Price Decline: ServiceNow's stock plummeted 18% following its latest earnings report, now down 62.4% from its all-time high, reflecting investor concerns over AI's impact on the software sector, which may pressure future revenues and profits.
- Strong Revenue Growth: Despite challenges, ServiceNow reported a 22% year-over-year revenue increase, with remaining contract obligations growing by 25%, indicating robust market demand and a solid business foundation among large enterprises.
- AI Control Tower Launch: In May 2025, ServiceNow unveiled its AI Control Tower, enabling enterprises to manage AI agents, enhancing its competitiveness in the AI era, and demonstrating foresight by preparing the product before the surge in AI agent usage.
- Subscription Model Adjustment: Management noted that approximately 50% of new contracts are now sold on a usage basis rather than traditional seat subscriptions, a shift that could help ServiceNow sustain growth in the AI era and mitigate revenue risks associated with increased efficiency.
See More
ServiceNow Shares Decline Amid AI Concerns
- Stock Decline: ServiceNow's shares fell by 15.5% last month, despite beating first-quarter estimates, indicating investor concerns about the sustainability of its business model amid broader software stock fears.
- AI Model Impact: The stock initially dropped in the second week of April following the announcement of its Mythos AI model, which was deemed too powerful and potentially exploitable, highlighting challenges in the AI sector for the company.
- Rating Downgrade: UBS downgraded ServiceNow from 'Buy' to 'Neutral', citing diminishing competitive advantages in application software, which contributed to further stock declines and reflected market concerns over budget pressures.
- Margin Pressure: Although first-quarter results met expectations, gross margins fell from 79% to 75%, indicating ongoing margin pressure as the company transitions from a seat-based model to AI products, which may affect future profitability.
See More
