In today’s digital world, software companies have become an essential part of the economy, offering both growth and stability in the market. These companies are fueled by generative AI integration in their systems, which makes them more efficient and faster.
These new and evolved advancements are creating an opportunity for investors to invest in software-providing stocks such as Intuit Inc. (INTU), Salesforce, Inc. (CRM), and Workday, Inc. (WDAY), which are currently finding favors on Wall Street.
Software companies are seeing significant expansion opportunities with the rising demand for cloud computing, AI, cybersecurity, and remote collaboration tools. According to a Deloitte report, nearly 80% of surveyed business leaders expect generative AI to drive substantial transformation within their organizations in the next three years.
Furthermore, the global market software revenue is projected to be $1.39 trillion by 2030, exhibiting a CAGR of 11.5%. This data underscores the strong demand for software solutions across various sectors.
Considering these conducive trends, let’s examine the Software - Application industry stocks in detail, beginning with the third choice:
Stock #3: Intuit Inc. (INTU)
INTU is a financial technology platform that helps consumers and small businesses prosper by delivering financial management, compliance, and marketing products and services. It operates through four segments: Small Business & Self-Employed; Consumer; Credit Karma; and ProTax.
On September 4, INTU announced major enhancements to its proprietary Generative AI Operating System (GenOS) that’s accelerating development velocity at scale across the company’s products and services.
The GenOS includes GenOS AI Workbench, which simplifies and streamlines end-to-end app development and enhancements to GenStudio, GenRuntime, and GenUX components.
On June 20, INTU and the Los Angeles Urban League announced the agreement to extend their partnership with the IDEAS (Invest, Develop, Empower, Accelerate, and Scale) Program. This program will now expand to a total of 100 small business owners, helping them grow and save time and money.
INTU's total net revenue for the fourth quarter (ended July 31, 2024) increased 17.4% year-over-year to $3.18 billion. Its non-GAAP operating income grew 16.4% from the prior year’s quarter to $730 million. The company’s non-GAAP net income for the quarter amounted to $730 million or $1.99 per share, representing an increase of 20.6% from the same period last year.
As per the forward-looking guidance for the fiscal year 2025, INTU forecasts revenue to be between $18.16 billion and $18.35 billion. The company also expects non-GAAP EPS between $19.16 and $19.36 and non-GAAP operating income to range from $7.24 billion to $7.14 billion.
The consensus revenue estimate of $3.88 billion for the fiscal second quarter (ending January 2025) represents a 14.7% increase year-over-year. The consensus EPS estimate of $3.25 for the same quarter indicates a 23.6% improvement year-over-year. The company has an impressive earnings surprise history; it surpassed the consensus EPS estimates in each of the trailing four quarters.
Over the past year, the stock has surged 13.9%, closing the last trading session at $626.99.
Of 22 analysts that rated INTU, 19 rated it Buy, while three rated it Hold. The 12-month median price target of $741.42 indicates an 18.3% upside potential from the last closing price. The price targets range from a low of $600 to a high of $795.
INTU’s POWR Ratings reflect this robust outlook. The stock has an overall rating of B, which equates to Buy in our proprietary rating system. The POWR Ratings are calculated by considering 118 different factors, with each factor weighted to an optimal degree.
INTU has a B grade for Growth, Sentiment, and Quality. It is ranked #33 out of 125 stocks in the Software - Application industry. Click here to see the additional ratings for INTU (Value, Momentum, and Stability).
Stock #2: Workday, Inc. (WDAY)
WDAY is a global provider of enterprise cloud applications for finance and human resources. It helps customers plan, execute, analyze, and extend to its varied applications to manage their business and operations.
On August 22, WDAY and Equifax Inc. (EFX), a global data analytics and technology company, announced a strategic partnership to help make employment and income verifications for WDAY customers easier and faster with more efficiency and reduced costs.
In the same month, WDAY announced the global release of Workday Payroll powered by Strada. This new AI-powered global HR and payroll solution gives organizations a unified view of their finance, anticipates trends, and customizes payroll services within the organization.
For the second quarter of 2025, which ended on July 31, WDAY’s total revenues increased 16.7% year-over-year to $2.09 billion, and its non-GAAP operating income stood at $518 million, indicating a 23% growth from the prior-year quarter period.
Its net income rose 67.1% from the year-ago value to $132 million, while its non-GAAP net income per share stood at $1.75, up 22.4% year-over-year. Also, the company’s free cash flow grew 43.3% from the year-ago value to $516 million.
The company has updated its fiscal year 2025 guidance. It now expects its subscription revenue to range between $7.700 billion and $7.7325 billion, representing a growth of approximately 17%. Additionally, WDAY expects its non-GAAP operating margin to be 25.25%.
Analysts expect WDAY’s revenue for the third quarter ending October 31, 2024, to increase 14.1% year-over-year to $2.13 billion, while its EPS for the same period is expected to increase 14.2% from the prior-year quarter to $1.75. The company surpassed consensus revenue and EPS estimates in each of the trailing four quarters, which is impressive.
WDAY shares have surged 19.6% over the past month and 17.6% over the past three months to close the last trading session at $253.52.
Based on 31 Wall Street analysts offering 12-month price targets for WDAY in the last three months, the average target price is $287.73, indicating a 13.5% change from the last price, with a high forecast of $352 and a low forecast of $240.
WDAY’s bright prospects are reflected in its POWR Ratings. The stock has an overall rating of B, which translates to a Buy in our proprietary rating system.
It also has an A grade for Growth and a B for Sentiment and Stability. Within the same industry, it is ranked #28 out of 125 stocks. Click here to see WDAY’s ratings for Value, Momentum, and Stability.
Stock #1: Salesforce, Inc. (CRM)
CRM provides Customer Relationship Management (CRM) technology that brings companies and customers together worldwide. It supports third-party development and offers global sales, service, and subscription services, enabling data storage, lead tracking, and issue resolution.
On September 5, CRM announced its acquisition of Own Company, a leading provider of data protection and data management solutions, for $1.90 billion in cash. This acquisition is set to enhance CRM’s ability to offer customers robust data protection and management solutions.
On July 24, the company announced a strategic partnership with WDAY to create an AI-powered employee service agent to boost productivity, lower costs, and improve the employee experience. The partnership will also deepen WDAY’s integration with Slack for seamless collaboration.
In the fiscal 2025 second quarter that ended on July 31, 2024, CRM’s total revenue increased 8.4% year-over-year to $9.33 billion. The company reported non-GAAP income from operations of $3.14 billion, indicating a 15.5% growth from the prior year quarter with a non-GAAP operating margin of 33.7% (up 210 bps year-over-year). Its free cash flow increased 20.2% year-over-year to $755 million.
CRM’s non-GAAP net income came in at $2.49 million, up 19.1% year-over-year, while its non-GAAP net income per share grew 20.8% from the year-ago value to $2.56.
For the fiscal year 2025, the company’s non-GAAP operating margin is projected to be 32.8%, with EPS anticipated to fall between $6.05 and $6.13. On a consolidated adjusted basis, its non-GAAP EPS is expected to range from $10.03 to $10.11.
Street expects CRM’s revenue for the fiscal fourth quarter (ending October 2024) to increase 7.2% year-over-year to $9.35 billion. Its EPS for the same period is expected to register a 16% growth from the prior year, settling at $2.45. In addition, it surpassed the consensus revenue and EPS estimates in each of the trailing four quarters, which is promising.
Shares of CRM have gained 9.3% over the past year to close the last trading session at $245.76.
Based on 38 Wall Street analysts offering 12-month price targets for CRM in the last three months, the average target price is $307.38, indicating a 25.1% change from the last price, with a high forecast of $352.00 and a low forecast of $236.00.
It’s no surprise that CRM has an overall rating of B, equating to a Buy in our POWR Ratings system. It has a B grade for Sentiment and Quality. Out of 125 stocks in the Software - Application industry, CRM is ranked #14.
Beyond what is stated above, we’ve also rated CRM for Growth, Value, Momentum, and Stability. Get all CRM ratings here.
What To Do Next?
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CRM shares were trading at $245.81 per share on Tuesday afternoon, up $0.05 (+0.02%). Year-to-date, CRM has declined -6.32%, versus a 16.08% rise in the benchmark S&P 500 index during the same period.
About the Author: Anushka Dutta
Anushka is an analyst whose interest in understanding the impact of broader economic changes on financial markets motivated her to pursue a career in investment research.
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