Key Takeaways
- Mizuho identifies Cloudflare, ServiceNow, and Atlassian as premier software investment opportunities heading into Q1 earnings reports
- Application software names under Mizuho’s coverage have plunged 61% on average in the past twelve months
- Forward EV/Sales multiples currently sit 40% beneath their three-year mean, presenting what Mizuho describes as compelling entry points
- Cloudflare’s 13% decline after the Claude Managed Agents reveal appears excessive, according to the firm
- Target prices were reduced across multiple holdings, including Microsoft, Palantir, Check Point, and Datadog
Mizuho Securities has singled out Cloudflare, ServiceNow, and Atlassian as its preferred software sector investments as companies prepare to report first-quarter financial results. Despite significant market turbulence, the firm’s industry research indicates healthy consumption patterns and robust artificial intelligence integration across enterprise customers.
The analysis, spearheaded by equity analyst Gregg Moskowitz, was released this Tuesday amid challenging market conditions for software equities.
Application software companies within Mizuho’s research universe have experienced an average decline of 61% over the trailing twelve-month period. Infrastructure-focused software names managed a modest 1% gain on average, while cybersecurity specialists retreated 22%.
Mizuho attributed the widespread downturn primarily to market anxiety surrounding AI-driven disruption. The research note emphasized that Software-as-a-Service (SaaS) companies have lagged infrastructure software peers by approximately 40 percentage points since February 2025.
Valuation metrics throughout the sector have undergone substantial compression. According to Mizuho’s calculations, next-twelve-month EV/Sales ratios currently trade 40% below their three-year historical averages. The firm characterized the present risk/reward dynamic as “quite attractive” for the coming year, though it cautioned investors to anticipate a “rocky path” in the near term.
Cloudflare
Cloudflare received “favorable” feedback in Mizuho’s channel checks for the current quarter. The firm anticipates the company will deliver another period of revenue growth exceeding its own guidance, marking a fourth consecutive quarter of accelerating top-line expansion.
Shares tumbled 13% following Anthropic’s announcement of Claude Managed Agents last Tuesday. Mizuho characterized this selloff as “overdone” and maintained its Outperform rating, although the price objective was reduced to $235 from the previous $255 target.
ServiceNow
ServiceNow’s first-quarter industry feedback revealed stronger-than-anticipated activity in large enterprise deals, Mizuho reported. The firm observed that Pro Plus product adoption continues advancing at a healthy pace.
Agentic AI capabilities delivered through assist packs are beginning to gain momentum among channel partners, though Mizuho acknowledged the technology remains in early adoption stages. The firm projects ServiceNow will surpass its 20% year-over-year constant currency cRPO growth forecast.
Mizuho retained its Outperform recommendation but adjusted the price target downward to $150 from $190. Shares currently change hands at approximately 12 times calendar year 2027 projected free cash flow.
Atlassian similarly maintained its Outperform designation. Mizuho lowered the price objective to $145 from $185 but continues to project significant subscription revenue acceleration for a second consecutive quarter.
The firm observed that reduced partner margin structures implemented several months earlier may have constrained the insights available through channel intelligence. Nevertheless, Atlassian’s feedback proved superior to results from several competitors.
Mizuho also implemented price target reductions across additional portfolio holdings. Check Point’s target decreased to $165 from $205. Microsoft was adjusted downward to $515 from $620. Palantir saw a reduction to $185 from $195. Datadog’s objective was lowered to $145 from $170.
The investment bank’s overall perspective on the software sector remained measured rather than pessimistic. Mizuho characterized public cloud and consumption dynamics as “generally good” while describing AI adoption as “very strong” based on first-quarter intelligence gathering.
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