Which Software Stocks Is BofA Securities Bullish On?

BofA reports strong AI and cloud momentum for Microsoft, Salesforce, and Datadog despite macroeconomic headwinds, based on discussions at a recent tech conference. Agentic AI applications are gaining traction, with companies like ServiceNow, JFrog, and Asana reporting early demand and anticipating growth catalysts in the second half of the year. While macro risks are acknowledged, software companies generally indicated a stable environment, with Microsoft highlighting sustained Azure momentum and Salesforce driving growth in core and Agentforce applications.

Analysis

Discussions at the BofA Global Technology Conference, involving 18 public and 10 private companies, indicated a generally stable software spending environment, though participants remain cognizant of underlying macroeconomic risks. A key takeaway highlighted by BofA Securities is the strong momentum in AI and cloud services, particularly for industry leaders. Microsoft Corp. (MSFT), with a Buy rating and a $515 price forecast, demonstrated sustained Azure business momentum driven by cloud migration and is rapidly innovating, evidenced by hundreds of thousands of customers already using M365 Copilot. Salesforce, Inc. (CRM), also Buy-rated with a $350 price forecast, is driving growth in its core offerings and the new Agentforce, despite noting pockets of weakness in tariff-impacted verticals like manufacturing and retail. Datadog, Inc. (DDOG), carrying a Buy rating and a $138 price forecast, is capitalizing on the increasing volume and complexity of cloud workloads due to AI, though its consumption-based model introduces inherent volatility. Agentic AI applications are emerging as a significant trend, with companies like ServiceNow, Inc. (NOW), JFrog Ltd. (FROG), and Asana, Inc. (ASAN) reporting healthy initial pilot activity and identifying these as potential second-half growth catalysts. ServiceNow (Buy, $1,085 price forecast) showed solid execution through macroeconomic challenges and sustained momentum across its application suites. JFrog (Buy, $48 price forecast) is seeing more AI-focused code this year and is considered well-positioned for H2 2025. Asana (Buy, $21 price forecast), despite slight incremental macro headwinds in its enterprise segment in April, anticipates its AI Studio could be a powerful catalyst in H2 2026. OneStream (OS), Buy-rated with a $33 price forecast, highlighted its AI value proposition in back-office solutions. Freshworks Inc. (FRSH), rated Neutral with an $18 price forecast, also noted healthy demand for its AI offerings, which are driving growth.

Key Decisions for Investors

• Investors should consider maintaining or increasing exposure to established cloud and AI leaders such as Microsoft and ServiceNow, which are demonstrating sustained momentum, strong product adoption, and are favorably rated by BofA with significant price targets.
• Monitor the development and adoption of agentic AI applications closely, as firms like Salesforce, JFrog, Asana, and ServiceNow are reporting promising early traction and pilot programs which could represent significant future revenue streams, even though current revenue impact is limited.
• Evaluate companies like Datadog for their AI-driven growth in cloud monitoring, while being mindful of the volatility associated with consumption-based models and the specific macro headwinds or vertical-specific weaknesses reported by companies including Salesforce and Asana.