Software Stocks Poised for Continued Growth in 2025
The software sector is expected to maintain its upward momentum in 2025, driven by improving earnings estimates and the increasing adoption of generative artificial intelligence. According to a Jefferies analyst, four key catalysts will fuel growth and valuation in the new year: strengthening fundamentals, accelerating AI monetization, a more favorable M&A environment, and budgets unlocking following election overhang.
Palantir and Oracle Lead the Charge
Palantir Technologies (PLTR) and Oracle (ORCL) have been standout performers in 2024, with Palantir stock surging 274% and Oracle advancing 82%. The iShares Expanded Tech-Software Sector ETF (IGV), which includes Microsoft (MSFT) and other big-cap software companies, has climbed nearly 31% this year and 19% since October.
AI Monetization Key to Future Growth
One of the biggest challenges facing software companies has been figuring out how to charge for AI-related products. However, with the shift towards AI agents, companies are now better positioned to generate new revenue streams. This trend is expected to continue in 2025, driving growth and valuation for software stocks.
Top Performers in 2025
Aside from Palantir and Oracle, other top performers in 2025 are expected to include cybersecurity company Fortinet (FTNT), as well as CrowdStrike Holdings (CRWD), Cloudflare (NET), Datadog (DDOG), and Snowflake (SNOW). These companies are well-positioned to benefit from the growing demand for AI and cloud computing solutions.
Earnings Season Heats Up
CrowdStrike and Workday (WDAY) are set to report earnings on Tuesday, followed by Salesforce (CRM) on December 3. Salesforce stock has advanced 30% in 2024, while CrowdStrike has been rebounding from a global IT outage in July. Meanwhile, Oracle stock has been on a tear, gaining over 80% year to date.
Stay Ahead of the Curve
For the latest updates on artificial intelligence, cybersecurity, and cloud computing, follow Reinhardt Krause on Twitter @reinhardtk_tech. Stay informed and make informed investment decisions with IBD’s premium stock lists, tools, and analysis.
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