TLDR
- Goldman Sachs begins software sector coverage with Buy recommendations for Microsoft, Oracle, and ServiceNow
- Microsoft named top choice with Azure cloud revenue expected to grow in 2026 supported by scale advantages
- Oracle Buy rating driven by clearer spending outlook and projected profit growth recovery by 2026
- ServiceNow set to capitalize on agent orchestration trend with workflow platform and AI technology
- Adobe and Datadog receive Sell ratings as competition increases and customers focus on cost reduction
Goldman Sachs has started coverage of U.S. software companies with clear buy and sell guidance for investors. The Wall Street bank selected three stocks as top investments and two as underperformers.
Goldman just dropped its 2026 software picks: Microsoft $MSFT, Oracle $ORCL and ServiceNow $NOW top the list 📈 pic.twitter.com/jwyDyvNhoU
— Trader Edge (@Pro_Trader_Edge) January 13, 2026
Gabriela Borges, a Goldman Sachs analyst, announced the ratings in a new sector report. The firm describes the current period as a “decade of agentic workflow” shaped by artificial intelligence adoption.
The three Buy-rated stocks are Microsoft, Oracle, and ServiceNow. Adobe and Datadog received Sell ratings from the investment bank.
Microsoft stands as Goldman Sachs’ top software investment recommendation. The firm sees room for growth in Azure cloud revenue during 2026.
Goldman credits Microsoft’s market position and careful business strategy. The bank expects Microsoft to grow revenue while maintaining strong margins.
Azure’s performance remains central to Goldman’s positive view on Microsoft stock. The cloud platform’s scale gives Microsoft an edge over competitors in the market.
Oracle Positioned for Profit Recovery
Oracle earned a Buy rating based on improving business visibility. Goldman Sachs predicts Oracle’s profit growth will strengthen by 2026.
The investment bank likes Oracle’s position in AI-related cloud computing. New data center capacity coming online in 2026 should accelerate Oracle’s growth rate.
Goldman views these infrastructure investments as key to Oracle’s future performance. The company’s cloud workload capabilities appeal to AI-focused customers.
ServiceNow received Goldman’s third Buy rating among software stocks. The company benefits from the shift toward agent orchestration in enterprise software.
Goldman sees ServiceNow’s workflow technology as a key strength. The company’s AI tools position it for sustained revenue growth ahead.
ServiceNow is moving into adjacent markets like customer relationship management and human resources software. These expansions support Goldman’s bullish investment outlook on the stock.
Challenges Face Adobe and Datadog
Borges noted that AI will boost the software market over the next five to ten years. However, she warned that annual results may vary as the technology develops.
Investors should focus on which companies can turn AI spending into lasting profits. Goldman predicts infrastructure software firms will expand gross margins from under 40% to over 60%.
Adobe faces headwinds that prompted Goldman’s Sell rating. Most new creative software growth happens at lower price points with rising competition.
Pricing pressure threatens Adobe’s premium market position. The company struggles to add new users, which could prevent double-digit growth rates.
Datadog also received a Sell rating from Goldman Sachs analysts. Competition is heating up in the cloud monitoring and observability software space.
Business customers are working to cut cloud monitoring costs in 2026. This budget focus combined with rival pressure could slow Datadog’s revenue growth.
Goldman expects these factors to weigh on Datadog’s stock valuation. The firm holds this negative view even while acknowledging Datadog’s platform quality.
The analyst stated that AI benefits will not spread evenly across software companies. Goldman’s selective ratings aim to identify which stocks will outperform and underperform.
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