TLDR
- Jefferies downgraded Workday, DocuSign, Monday.com, and Freshworks to Hold over AI disruption risks
- Software stocks are down 30–55% in 2026, worse than the IGV index’s 24% decline
- Jefferies favors Intuit, Procore, Atlassian, and Salesforce as better placed for the AI shift
- The iShares software ETF has fallen 31% but is sitting at a price level where buyers have historically returned
- A Microsoft board member made the first insider purchase in 10 months, buying $2 million worth of shares
Jefferies has overhauled its U.S. software stock coverage, cutting four companies to Hold and identifying a group of preferred names it believes are better placed to handle the AI transition.
Analyst Brent Thill used a new AI risk framework alongside company fundamentals to reassess the sector. The review comes as many software stocks have dropped between 30% and 55% this year, well below the IGV software index’s 24% decline.
Workday, DocuSign, Monday.com, and Freshworks all received downgrades. Each was flagged for a different combination of weak growth, execution concerns, or rising competitive pressure from AI.
Workday was singled out for leadership changes and ongoing execution issues. Thill said the company’s medium-term growth targets need to come down again.
DocuSign’s Intelligent Agreement Management platform was described as still unproven. Thill said a return to double-digit growth remains a long way off for the company.
Monday.com was flagged for an unclear outlook across both its small business and enterprise customer base. Freshworks faces direct AI competition in its core customer experience business.
The Stocks Jefferies Prefers
Thill named Intuit, Procore, Atlassian, and Salesforce as his preferred picks. He sees these companies as more durable businesses with stronger internal AI adoption.
Intuit is Jefferies’ top large-cap choice. Its large data assets and wide customer base give it an edge in rolling out AI tools at scale.
Atlassian is viewed as a direct beneficiary of AI-driven coding trends. More AI-generated code is expected to increase demand for IT collaboration software, which sits at the center of Atlassian’s business.
Salesforce was called the best-positioned apps vendor to deliver on AI agents. Strong execution could drive broader growth across the company.
Procore was highlighted as an attractive mid-cap vertical software story, with revenue expected to pick up as economic conditions improve.
Software ETF and Microsoft Insider Signal
The iShares Expanded Tech-Software Sector ETF has dropped 31% from its record high of just over $117 set in late September. It recently touched a low of just over $79.
That level matches where buyers have stepped in before, including near $81 after an April 2025 selloff and in the high $70s during 2023 and 2024.
Bank of America strategist Savita Subramanian has warned that valuations could fall further. She says recent changes to analyst earnings estimates suggest forward price-to-earnings multiples may not have bottomed yet.
Despite that caution, a closely watched signal emerged at Microsoft. Board member John Stanton bought 5,000 shares worth close to $2 million, the first insider purchase at the company in 10 months.
Jefferies trading analyst Jeff Favuzza noted that the one previous instance of insider buying since 2022 was followed by a 51% gain in Microsoft stock over the following six months.
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