TLDR
- Four software companiesâWorkday, DocuSign, Monday.com, and Freshworksâreceived Hold ratings from Jefferies due to AI disruption threats
- The sector has seen declines ranging from 30% to 55% in 2026, underperforming the IGV index which fell 24%
- Intuit, Procore, Atlassian, and Salesforce emerge as Jefferies’ top choices for navigating the AI transformation
- The iShares software ETF has declined 31% and now trades at a historically significant support level
- Microsoft’s first insider stock purchase in nearly a year saw a board member acquire $2 million in shares
A comprehensive review of U.S. software equities by Jefferies has resulted in downgrades for four prominent companies, while simultaneously spotlighting alternative investments the firm believes are better equipped for the artificial intelligence era.
Brent Thill, an analyst at Jefferies, employed a fresh AI risk assessment model combined with traditional fundamental analysis to reevaluate sector participants. This strategic repositioning arrives during a challenging period where numerous software companies have experienced steep declines of 30% to 55% year-to-date, significantly underperforming the broader IGV software index’s 24% drop.
The four companies receiving downgradesâWorkday, DocuSign, Monday.com, and Freshworksâeach face distinct challenges including sluggish expansion rates, operational difficulties, or intensifying AI-driven competition.
Workday drew particular scrutiny for management transitions and persistent operational challenges. According to Thill, the company will need to revise its medium-term growth projections downward once again.
Regarding DocuSign, the analyst characterized its Intelligent Agreement Management offering as lacking proven market traction. The path back to double-digit percentage growth appears distant for the electronic signature specialist.
Monday.com faces uncertainty regarding its trajectory with both small-to-medium businesses and enterprise clients. Meanwhile, Freshworks confronts direct artificial intelligence-powered competition within its primary customer experience segment.
The Stocks Jefferies Prefers
In contrast, Thill designated Intuit, Procore, Atlassian, and Salesforce as superior investment opportunities. These organizations demonstrate more resilient business models and have made greater progress integrating AI capabilities internally.
Intuit stands as Jefferies’ premier large-cap selection. The company’s extensive data repositories and broad customer reach position it favorably for deploying artificial intelligence solutions across its user base.
Atlassian emerges as a primary beneficiary of AI-powered software development trends. As artificial intelligence generates increasing volumes of code, demand should strengthen for IT collaboration platformsâthe foundation of Atlassian’s offerings.
Salesforce earned recognition as the applications vendor best positioned to capitalize on AI agent technology. Successful implementation could catalyze growth momentum throughout the organization.
Procore received attention as an appealing mid-cap vertical software investment opportunity, with revenue acceleration anticipated as macroeconomic conditions stabilize.
Software ETF and Microsoft Insider Signal
The iShares Expanded Tech-Software Sector ETF has plummeted 31% from its September peak of approximately $117. Recent trading brought the fund to lows just above $79.
This price zone represents a historically significant area where institutional buyers have previously entered, including near $81 following an April 2025 correction and within the high $70s throughout 2023 and 2024.
Bank of America strategist Savita Subramanian has cautioned that valuations may still have room to compress further. She points to recent revisions in analyst earnings projections suggesting forward price-to-earnings ratios haven’t necessarily reached their floor.
Nonethstanding these concerns, an encouraging development materialized at Microsoft. Board member John Stanton acquired 5,000 shares valued at approximately $2 millionâmarking the company’s first insider transaction in ten months.
Jeff Favuzza, trading analyst at Jefferies, observed that the sole previous instance of insider purchasing since 2022 preceded a 51% appreciation in Microsoft shares over the subsequent six-month period.
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