The software industry is entering its third year of adapting to artificial intelligence, with analysts noting that early fears of AI destroying businesses have not materialized. D.A. Davidson analyst Gil Luria stated in a research note that the primary impact so far has been on market sentiment and hesitant customers. He observed that companies are beginning to realize neither they nor their software vendors have been overtaken by AI, which may be changing the dynamic of customer commitment.
As investment returns to the sector, analysts from D.A. Davidson, Piper Sandler, and Truist Securities have highlighted specific companies expected to drive growth. A consistent theme across their selections is a focus on firms providing the foundational infrastructure for AI development.
From D.A. Davidson, Luria's top pick for 2026 is Commvault, citing a potential upside exceeding 50% and a $220 price target based on sustained momentum and margin recovery. The firm also identified Manhattan Associates, a supply chain and retail software company described as a "subscription acceleration story" with a return on invested capital above 100% and a $250 target. Marketing platform Zeta Global was noted for benefiting from legacy tech replacement, with a $29 price target.
Other names on the list include Box, advancing through "Enterprise Advanced" upgrades with a $45 target, and Datadog, termed a "complete Observability platform" for AI environments with a $225 target.
Piper Sandler analyst James Fish emphasized companies appealing to younger demographics and infrastructure plays. He pointed to Rubrik with a $75 target following its SaaS transition, Nutanix at $50 as it gains market share from VMware, and Axon with a $563 target for its recurring public safety model and drone integration.
Terry Tillman of Truist Securities addressed concerns that AI-driven human efficiency might reduce software license purchases. He argued the industry is evolving, with the rise of "agentic AI"—autonomous bots operating continuously—prompting a move toward consumption-based pricing models. "As workflows move from human-initiated tasks to autonomous agents executing at scale, billing tied to usage becomes the most logical way to capture value," Tillman wrote, noting examples like compute, data processing, and transactions. He added that AI agents operate non-stop, potentially increasing billable events.
Tillman indicated this shift benefits vendors who can show daily return on investment, invest heavily in research and development, and build transparent metering tools. He highlighted ServiceNow with a $781 target as a leader in early transition, JFrog at $65 in mid-transition, and Snowflake at $220 as a model for consumption-driven pricing.
These companies anticipate that increased AI adoption will generate enough data processing and transaction volume to compensate for any reduction in user-based licensing. Analysts suggest that by 2026, market interest is driven not by renewed hype but by rational valuations, reduced customer hesitation, and the absence of anticipated disruptive threats.