U.S. software stocks are reaching fresh 2026 highs, supported by a sharp rise in earnings expectations, according to reports. Analysts believe the gains indicate that fears over AI-led disruption in the sector were largely overstated.
The S&P 500 software and services index rose 1.3% Tuesday to its highest level since November 2025, after posting its biggest quarterly gain from July through September since the second quarter of 2020.
Strong earnings from Salesforce, ServiceNow and Accenture, along with partnerships with AI labs, have also helped revive the sector. Cybersecurity stocks, in particular, have seen major gains as companies increase spending on cybersecurity in the age of AI. Companies including CrowdStrike, Fortinet and Palo Alto Networks have posted triple-digit percentage gains this year.
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“AI has been more of an enabler for a lot of these software companies, more than a disruptor,” said Adam Turnquist, chief cross-asset strategist at LPL Financial.
“We’re seeing more of a trend change now where software has recaptured the leadership reins, and we think there’s a window here for outperformance in software over semiconductors.”
The sector’s expected annual earnings growth rate for 2026 has climbed to 20.6%, up from 13.8% at the end of March, according to LSEG data.
Analysts now believe that fears over the “SaaSpocalypse” were overblown. The term refers to concerns that companies could use AI to build applications in-house more cheaply, triggering a selloff in software stocks. The software index fell more than 26% from late January to its lowest point in April amid those concerns.
Wall Street was concerned that AI could disrupt software-as-a-service companies because analysts believed tools such as Anthropic’s Claude Code would make it easier for businesses to replicate legacy software products.
Analysts also feared that if AI reduced the global workforce by increasing economic productivity, SaaS companies that charge customers on a per-user basis could experience a sharp drop in revenue.
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“The whole SaaSpocalypse didn’t happen anywhere near as fast as some of the people on Wall Street thought it would,” said Rebecca Wettemann, CEO of technology research firm Valoir. She added that vendors were reporting increased customer adoption as AI moved beyond the experimental stage.
However, risks remain for the sector. Brian Mulberry, chief market strategist at Zacks Investment Management, said the real test for software stocks could come in the second half of 2027, when additional data center capacity could make AI coding a bigger threat to traditional software firms.