Software stocks are making a comeback. ServiceNow jumped 8.8% on Monday, marking its largest one-day gain in over a year. This surge followed BofA Securities reinstating coverage with a Buy rating, which helped restore investor confidence in a sector that faced pressure in 2026 over concerns that AI might replace, not support, enterprise software. Here’s a look at what’s fueling the software rebound and which companies are out in front.
BofA Securities gave ServiceNow a Buy rating and set a $130 price target, saying the company is likely to benefit from new AI tools instead of being replaced by them. This upgrade came at a key time. Even after Monday’s rally, ServiceNow is still down 32% for the year and 49% over the past twelve months. It was one of the hardest hit during the long software selloff caused by worries about AI disrupting software-as-a-service business models.
The rebound goes beyond ServiceNow. Many software stocks have picked up speed in May. Datadog and Fortinet are up about 58% and 50% this month. Palo Alto Networks, CrowdStrike, and Figma have each climbed nearly 40%. Akamai Technologies and JFrog have posted even bigger gains. The iShares Expanded Tech-Software Sector ETF bounced back from a low near $74 in April to trade above $90.
Palo Alto’s recovery is especially notable. The stock closed Monday at $247.55, just under its 52-week high of $248.85. It had dropped as low as $155.73 on April 10, close to the bottom of its yearly range. This quick move from lows to highs shows how fast investor sentiment has changed in the sector.
A recent disclosure from the U.S. Office of Government Ethics added more excitement. President Trump bought between $1 million and $5 million of ServiceNow, Adobe, and Workday on February 10. This news has helped boost the SaaS comeback story among retail investors.
Agilysys also made a notable move on Tuesday, rising 14% after reporting strong subscription growth, record sales, and more AI integration in its business. Oppenheimer said the company is now in a clear uptrend and expects this to last into 2027. Meanwhile, ServiceNow lost 1.3% on Tuesday as the broader market pulled the Nasdaq down 1.2%.
