Key Takeaways
- Four software companies—Workday, DocuSign, Monday.com, and Freshworks—received downgrades to Hold from Jefferies
- These stocks have tumbled 30–55% year-to-date in 2026, outpacing the broader IGV software index drop of 24%
- Jefferies highlights Intuit, Procore, Atlassian, and Salesforce as superior choices for navigating AI disruption
- The iShares software ETF has declined 31% and now trades at historically significant support levels
- A Microsoft board member purchased $2 million in shares—the first insider buy in nearly a year
Jefferies has completed a comprehensive reassessment of its U.S. software sector recommendations, downgrading four companies while highlighting several others it views as more resilient amid the artificial intelligence transformation.
Analyst Brent Thill deployed a newly developed AI risk assessment model combined with traditional fundamental analysis to reevaluate the space. This strategic shift arrives as numerous software names have experienced steep declines ranging from 30% to 55% during the current year, significantly underperforming the IGV software benchmark’s 24% pullback.
The firms receiving downgrades—Workday, DocuSign, Monday.com, and Freshworks—each face distinct challenges including stagnant growth trajectories, operational missteps, or heightened AI-driven competition.
Workday drew particular concern over recent management transitions and persistent operational challenges. According to Thill, the company will likely need to revise its medium-term growth projections downward once again.
DocuSign’s recently launched Intelligent Agreement Management offering hasn’t demonstrated meaningful traction yet. Thill believes the path back to double-digit revenue expansion remains distant for the e-signature provider.
Monday.com struggles with visibility across both its small and medium-sized business segment and enterprise clientele. Freshworks confronts direct competitive threats from AI solutions targeting its primary customer experience market.
Jefferies’ Preferred Software Holdings
Thill identified Intuit, Procore, Atlassian, and Salesforce as his top recommendations. These organizations demonstrate more sustainable business models alongside more advanced AI integration efforts.
Intuit stands as Jefferies’ premier large-cap selection. The company’s extensive data repositories and broad customer footprint position it advantageously for deploying AI capabilities across its user base.
Atlassian should benefit directly from AI-accelerated software development trends. As artificial intelligence generates increasing volumes of code, demand for IT collaboration platforms—core to Atlassian’s offering—should correspondingly strengthen.
Salesforce earned recognition as the applications software provider best equipped to capitalize on AI agent technology. Successful implementation could catalyze expansion throughout its product portfolio.
Procore represents an appealing mid-capitalization vertical software opportunity, with revenue growth anticipated to accelerate as macroeconomic headwinds subside.
Technical Support and Insider Activity Emerge
The iShares Expanded Tech-Software Sector ETF has surrendered 31% from its September peak above $117. Recent trading brought the fund down to approximately $79.
This price zone has historically attracted buyers, including near $81 following last April’s correction and in the upper $70s throughout 2023 and 2024.
Bank of America strategist Savita Subramanian has cautioned that further valuation compression may occur. She points to recent analyst earnings revision patterns suggesting forward price-to-earnings ratios haven’t necessarily reached their floor.
Yet a noteworthy development occurred at Microsoft. Board member John Stanton acquired 5,000 shares valued at approximately $2 million—marking the company’s first insider purchase in ten months.
Jefferies trading analyst Jeff Favuzza observed that the single previous insider buying episode since 2022 preceded a 51% Microsoft stock appreciation over the subsequent six-month period.
