Key Takeaways
- Investment bank Mizuho has identified Cloudflare, ServiceNow, and Atlassian as leading software investment opportunities before Q1 earnings releases
- Software application stocks under Mizuho’s research umbrella have plunged 61% on average in the last twelve months
- Forward-looking EV/Sales ratios currently sit 40% beneath their three-year mean, presenting what Mizuho considers compelling valuation entry points
- The firm views Cloudflare’s 13% decline after the Claude Managed Agents reveal as an excessive market reaction
- Mizuho reduced price objectives broadly, affecting companies like Microsoft, Palantir, Check Point, and Datadog
Mizuho Securities has designated Cloudflare, ServiceNow, and Atlassian as premier software equity selections heading into the opening quarter earnings period. Despite widespread valuation compression throughout the software industry, the firm’s channel analysis indicates robust consumption patterns and artificial intelligence implementation momentum.
Analyst Gregg Moskowitz spearheaded the research note released this Tuesday. The timing coincides with a challenging period for software equities across the board.
Application software companies within Mizuho’s research scope have experienced an average decline of 61% throughout the past year. Infrastructure-focused software names managed a modest 1% average gain, while cybersecurity specialists retreated 22%.
Mizuho identified concerns surrounding AI-driven disruption as a primary catalyst behind the widespread selloff. The research highlighted that Software-as-a-Service companies have lagged infrastructure software by approximately 40 percentage points since February 2025.
The sector has undergone a significant valuation recalibration. According to Mizuho’s analysis, next-twelve-month enterprise value-to-sales multiples currently trade 40% below their three-year historical average. The firm characterized the present risk-versus-reward profile as “quite attractive” for a twelve-month horizon, though it cautioned investors about potential near-term volatility.
Cloudflare
Cloudflare received “favorable” feedback in Mizuho’s quarterly channel assessments. The firm anticipates the company will deliver another period of top-line growth exceeding management’s guidance and mark its fourth consecutive quarter of accelerating revenue expansion.
Shares declined 13% following Anthropic’s announcement of Claude Managed Agents this past Tuesday. Mizuho characterized this selloff as an “overdone” market reaction and maintained its Outperform recommendation, despite reducing the price objective to $235 from the previous $255 target.
ServiceNow
ServiceNow’s first-quarter industry checks revealed stronger-than-anticipated activity in large enterprise deals, Mizuho reported. The investment bank noted that Pro Plus product adoption is advancing at an encouraging pace.
Agentic artificial intelligence capabilities delivered via assist packages are building momentum within distribution channels, though Mizuho emphasized the early-stage nature of this development. The firm projects ServiceNow will surpass its internal forecast calling for 20% year-over-year constant currency committed remaining performance obligation growth.
Mizuho preserved its Outperform designation while adjusting the price target downward to $150 from $190. Shares are presently valued at approximately 12 times calendar year 2027 projected free cash flow.
Atlassian similarly retained its Outperform rating from Mizuho. The firm decreased its price objective to $145 from $185 but continues to forecast significant subscription revenue acceleration for a consecutive second quarter.
Mizuho observed that reduced partner commission structures implemented several months prior might have constrained the insights gleaned from channel feedback. Nevertheless, Atlassian’s industry checks delivered superior results compared with certain competitor assessments.
Mizuho implemented price target reductions across multiple additional portfolio companies. Check Point’s objective dropped to $165 from $205. Microsoft saw a reduction to $515 from $620. Palantir’s target decreased to $185 from $195. Datadog received a cut to $145 from $170.
The investment bank’s overall software sector perspective reflected caution without outright pessimism. Research indicated that public cloud infrastructure and consumption dynamics were “generally good” and artificial intelligence adoption registered as “very strong” based on Q1 channel assessments.
