TLDR
- Four software companies—Workday, DocuSign, Monday.com, and Freshworks—received Hold ratings from Jefferies amid concerns over AI-driven disruption
- Year-to-date declines for individual software stocks range from 30% to 55%, outpacing the IGV index’s 24% slide
- Jefferies identifies Intuit, Procore, Atlassian, and Salesforce as best-positioned for navigating the AI transformation
- The iShares software ETF touched a key technical level where institutional buyers have previously emerged
- Microsoft’s first board-level insider purchase in nearly a year signals potential bullish momentum ahead
Jefferies has undertaken a comprehensive reassessment of its U.S. software sector coverage, downgrading four prominent companies while highlighting mounting challenges stemming from artificial intelligence disruption.
Senior analyst Brent Thill moved Workday, DocuSign, Monday.com, and Freshworks to Hold ratings. His analysis points to deteriorating market sentiment, intensifying competition, and deceleration in revenue expansion across these firms.
Workday’s downgrade reflects concerns about management transitions and operational missteps. According to Thill, the company’s intermediate-term growth projections require another downward revision.
DocuSign’s challenge centers on lackluster advancement of its Intelligent Agreement Management solution. Thill’s assessment indicates that achieving double-digit revenue growth remains a distant target.
Monday.com earned its downgrade based on what Thill characterized as murky business visibility across both its SMB and enterprise customer bases. Meanwhile, Freshworks confronts emerging AI-powered alternatives in its primary customer service software market.
The software industry has experienced severe market turbulence. Individual company valuations have contracted between 30% and 55% year to date. By comparison, the IGV software benchmark index has retreated approximately 24% during the same timeframe.
Jefferies employed a proprietary AI risk assessment methodology combined with traditional fundamental analysis to reevaluate sector constituents. This approach aims to distinguish between vulnerable companies and those positioned to capitalize on technological transformation.
Jefferies’ Preferred Software Stocks
Among the bright spots, Thill designated Intuit, Procore, Atlassian, and Salesforce as favored holdings. These companies demonstrate more resilient business models and superior capabilities for integrating AI technologies.
Intuit ranks as Jefferies’ premier large-capitalization selection. The firm’s extensive proprietary datasets and expansive user ecosystem provide competitive advantages for implementing AI-powered features.
Procore emerged as a compelling mid-cap vertical software opportunity. Thill anticipates accelerating revenue growth as macroeconomic headwinds subside.
Atlassian stands to benefit directly from AI-facilitated software development trends. Increased machine-generated code production creates greater demand for IT coordination platforms—Atlassian’s primary domain.
Salesforce received recognition as the enterprise applications provider most capable of monetizing AI agents. Successful implementation could catalyze broader expansion throughout the organization.
Software ETF Hits Historical Support Level
Meanwhile, the iShares Expanded Tech-Software Sector ETF has plummeted 31% from its September peak above $117. The fund recently touched a floor just above $79.
This price zone coincides with previous areas of institutional accumulation. The ETF discovered support around $81 following April 2025’s correction, and repeatedly bounced from the high-$70s to low-$80s throughout 2023 and 2024.
Bank of America strategist Savita Subramanian has warned that valuations may face additional pressure. Her analysis of earnings revision trends suggests forward P/E multiples could compress further.
A noteworthy development emerged from within Microsoft. Director John Stanton acquired 5,000 shares valued at approximately $2 million late this month. This represents Microsoft’s first board-level insider purchase in 10 months, per Jefferies trading specialist Jeff Favuzza.
Favuzza observed that Microsoft insiders have predominantly liquidated shares during rallies since early 2022. The sole previous insider acquisition preceded a 51% stock appreciation over the subsequent six-month period beginning last April.
