The software industry is gaining momentum, driven by the robust IT spending on solutions and the demand for a global digital transformation. Companies are becoming faster and more efficient by integrating AI into their systems, which is helping to drive this growth.

Therefore, investors could consider investing in fundamentally strong software stocks such as Salesforce, Inc. (CRM), Workday, Inc. (WDAY), and Commvault Systems, Inc. (CVLT), which have seen remarkable revenue growth and are continuing to expand their cloud services.

The demand for Software-as-a-Service (SaaS), cloud storage, and cloud computing solutions is increasing, driven by the ongoing digital transformation across industries. According to Gartner, global IT spending is forecasted to increase 7.5% year-over-year to $5.27 trillion, providing a substantial upside for software companies.

Furthermore, the global software market is anticipated to reach $2.25 trillion by 2034, exhibiting a CAGR of 11.8%. Meanwhile, the cloud computing market is forecasted to expand at a CAGR of 16.4%, reaching $1.44 trillion by 2029. Analysts believe that cloud-based AI, machine learning, and data analytics are future growth drivers for the industry, enabling businesses to enhance customer retention and improve margins through technology integration.

Considering these conducive trends, let’s examine the Software – Application industry stocks in detail, beginning with the third choice:

Stock #3: 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 September 18, WDAY announced the release of Workday Wellness, a new AI-powered solution, providing companies with a real-time view into which benefits and wellness their employees want and use. This new AI-powered solution will enhance employee well-being and create more personalized health benefits.

In the same month, WDAY agreed to acquire Evisort, a leading AI-native document intelligence platform. This acquisition will enable WDAY’s customers to surface critical insights, make decisions, and take faster actions across financial and HR data faster and more efficiently with Evisort’s document intelligence.

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 $7.70 billion and $7.73 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 14.2% year-over-year to $2.13 billion, while its EPS for the same period is expected to increase 14.8% from the prior-year quarter to $1.76. The company surpassed consensus revenue and EPS estimates in each of the trailing four quarters, which is impressive.

WDAY shares have surged 12.8% over the past year and 5.4% over the past three months to close the last trading session at $242.47.

WDAY’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.

WDAY has an A grade for Growth and B for Sentiment and Quality. It is ranked #22 out of 131 stocks in the Software – Application industry. Click here to see the additional ratings for WDAY (Value, Momentum, and Stability).

Stock #2: 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 17, CRM announced a strategic collaboration with NVIDIA Corporation (NVDA) to develop and co-innovate advanced AI capabilities and interactive avatar experiences within their platforms, CRM’s Agentforce and NVDA’s AI platform. This collaboration will enable new insights and improved productivity across the sales, service, marketing, and IT teams.

On the same day, CRM and Google Cloud announced the extension of their partnership to create Salesforce Agentforce Agents that will allow people to collaborate securely across Salesforce Customer 360 and Google Workspace apps. The partnership will help create the first agent ecosystem, delivering a fully AI-infused productivity suite.

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. CRM expects total revenue to range between $37.7 billion and $38 billion, representing a growth of 8%-9%.

Street expects CRM’s revenue for the fiscal third 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 15.9% growth from the prior year, settling at $2.45. In addition, it surpassed the consensus EPS estimates in each of the trailing four quarters, which is promising.

Shares of CRM have gained 42.6% over the past year and 14.6% over the past month to close the last trading session at $291.64.

CRM’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 a B grade for Sentiment and Quality. Within the same industry, it is ranked #19 out of 131 stocks. Click here to see CRM’s ratings for Growth, Value, Momentum, and Stability.

Stock #1: Commvault Systems, Inc. (CVLT)

CVLT provides data protection and information management software applications and services to large enterprises, small and medium-sized businesses, and government agencies globally. Its offerings include Commvault Backup and Recovery, Commvault Disaster Recovery, Commvault Complete Data Protection, Commvault HyperScale X, and Metallic Data Protection-as-a-service.

On October 8, CVLT expanded its partnership with Google Cloud. CVLT will provide a new solution, Commvault®, for Cloud Backup & Recovery for Google Workspace. This advanced solution will deliver comprehensive, end-to-end enterprise-grade protection, multi-layered cyber resilience, and the simplicity of SaaS.

On the same day, CVLT launched Cloud Rewind, a cloud-native application recovery and rebuild program on its platform. This unique offering will help businesses restore data within minutes after a cyberattack, simplifying cloud cyber recovery.

CVLT’s total revenue for the first quarter (ended June 30, 2024) increased 13.4% year-over-year to $224.67 million. Further, its non-GAAP income from operations grew 10.9% from the prior year’s quarter to $48.30 million.

The company’s non-GAAP net income for the quarter amounted to $38.40 million or $0.85 per share, reflecting an increase of 18.1% from the same period last year. Also, its non-GAAP free cash flow rose 15.7% from the year-ago value to $43.83 million.

As per the financial outlook for the fiscal year 2025, CVLT’s total revenues are expected to be between $915 million and $925 million. The company also expects subscription revenue to be between $522 million and $527 million and the non-GAAP operating margin to range from 20% to 21%.

The consensus revenue estimate of $220.88 million for the fiscal second quarter (ended September 2024) represents a 9.9% increase year-over-year. The consensus EPS estimate of $0.76 for the same quarter indicates an 8.1% improvement year-over-year. The company has an impressive surprise history; it surpassed the consensus revenue and EPS estimates in each of the trailing four quarters.

Over the past year, the stock has surged 144.9%, closing the last trading session at $163.91.

It’s no surprise that CVLT has an overall rating of B, equating to a Buy in our POWR Ratings system. It has an A grade for Quality and a B for Growth and Sentiment. Out of 131 stocks in the Software – Application industry, CVLT is ranked #15.

Beyond what is stated above, we’ve also rated CVLT for Value, Momentum, and Stability. Get all CVLT ratings here.

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CRM shares were trading at $291.66 per share on Tuesday morning, up $0.02 (+0.01%). Year-to-date, CRM has gained 11.33%, versus a 24.13% rise in the benchmark S&P 500 index during the same period.

About the Author: Shweta Kumari

Shweta's profound interest in financial research and quantitative analysis led her to pursue a career as an investment analyst. She uses her knowledge to help retail investors make educated investment decisions. More...

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