Digital transformation initiatives across various industries have been driving the growth of the software application industry. Cloud-based software applications have replaced traditional software by helping enterprises scale their operations and improve productivity.
Given the bright prospects of the software industry, it could be wise to buy fundamentally strong software stocks Synopsys, Inc. (SNPS – Get Rating), Salesforce, Inc. (CRM – Get Rating), and SAP SE (SAP – Get Rating).
Before diving deeper into the fundamentals of these stocks, let’s discuss why the software application industry is well-positioned to grow.
Cloud adoption has been a significant driver of the industry’s growth as cloud-based software has become more accessible and affordable. Software companies are reporting significant growth in their annual recurring revenues (ARR) because of their subscription-based products.
The industry’s growth is expected to be further enhanced by integrating generative AI into software applications. According to a Goldman Sachs report, as software companies integrate generative AI tools into products, their customers will spend more on software. Goldman Sachs expects generative AI to add an incremental $150 billion to the current global software market of $685 billion.
Gartner forecasts software spending to increase 13.7% year-over-year to $922.75 billion. Gartner’s Distinguished VP Analyst John-David Lovelock said, “Generative AI’s best channel to market is through software, hardware, and services that organizations are already using. Every year, new features are added to tech products and services as add-ons or upgrades.”
“Most enterprises will incorporate generative AI in a slow and controlled manner through upgrades to tools that are already built into IT budgets,” he added.
Considering these conducive trends, let’s evaluate…
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