TLDR
- Goldman Sachs launches U.S. software sector analysis with Buy ratings on Microsoft, Oracle, and ServiceNow stocks
- Microsoft receives top rating with Azure revenue growth projected for 2026 based on scale and margin discipline
- Oracle earns Buy rating from improving capital spending outlook and expected profit growth rebound in 2026
- ServiceNow positioned as winner in agent orchestration trend with workflow platform and AI technology strengths
- Adobe and Datadog assigned Sell ratings as pricing pressure and competition threaten revenue growth prospects
Goldman Sachs has released its first coverage of U.S. software companies with specific investment guidance. The Wall Street firm identified three stocks to buy and two to sell.
Analyst Gabriela Borges published the ratings as part of Goldman’s new software sector analysis. The bank describes the industry as entering a “decade of agentic workflow” driven by artificial intelligence.
Microsoft, Oracle, and ServiceNow received Buy ratings from the investment firm. Adobe and Datadog were assigned Sell ratings due to competitive and pricing concerns.
Microsoft represents Goldman Sachs’ top investment choice in the software sector. The firm projects upside for Azure cloud service revenue in 2026.
Goldman praised Microsoft’s market scale and strategic business approach. The bank expects Microsoft to grow revenue while protecting profit margins.
Azure’s competitive position anchors Goldman’s bullish view on Microsoft. The cloud platform’s size provides advantages in attracting enterprise customers and AI workloads.
Oracle Cloud Growth Drives Buy Rating
Oracle secured a Buy rating based on clearer financial visibility ahead. Goldman Sachs forecasts Oracle’s profit growth will recover by 2026.
The investment bank likes Oracle’s position in AI-related cloud computing infrastructure. Additional data center capacity launching in 2026 should accelerate Oracle’s growth trajectory.
Goldman views these infrastructure investments as essential to Oracle’s future performance. The company’s cloud capabilities appeal to businesses deploying AI applications.
ServiceNow earned Goldman’s third Buy rating among software companies. The stock benefits from the industry shift toward agent orchestration in enterprise software.
Goldman considers ServiceNow’s workflow technology a core advantage. The company’s AI capabilities position it for continued revenue growth.
ServiceNow is expanding into related software categories including sales management and human resources platforms. These strategic moves strengthen Goldman’s bullish investment thesis.
Competition Pressures Adobe and Datadog
Borges stated that AI adoption will boost software market growth over five to ten years. However, she warned that annual performance may fluctuate as the technology evolves.
The key question for investors centers on which companies can convert AI infrastructure demand into sustainable profits. Goldman predicts infrastructure software firms will increase gross margins from under 40% to over 60%.
Adobe faces market dynamics that triggered Goldman’s Sell rating. Growth in creative software concentrates at lower price points where competition intensifies.
Pricing pressure challenges Adobe’s premium positioning in the market. The company’s struggle to attract new users could limit growth to single digits.
Datadog also received a Sell rating from Goldman Sachs research. Competition is escalating in the cloud monitoring and observability software market.
Enterprise customers are emphasizing cloud cost reduction throughout 2026. This budget focus combined with competitive threats could constrain Datadog’s revenue expansion.
Goldman expects these market forces to pressure Datadog’s stock valuation multiple. The firm maintains its negative outlook despite acknowledging Datadog’s technical platform quality.
The analyst noted that AI-driven benefits will not spread uniformly across software companies. Goldman’s selective ratings aim to identify stocks positioned to outperform versus underperform the sector.
