The brutal selloff that battered software stocks, especially those in the software-as-a-service (SaaS) sector, might be behind us. Deutsche Bank’s latest analysis suggests what many had feared-the so-called ”SaaSpocalypse”-is fading as the market starts seeing value in these discounted shares. After consulting a broad range of industry experts and AI tools, Deutsche Bank found no software company anticipating a revenue decline from AI impacts in 2026, signaling that fears around AI disruption may have peaked.
Data from Deutsche Bank Securities shows hedge funds are warming to SaaS investments once again, taking advantage of bargain prices. Over the past month, the S&P 500 software index nudged up 1.5 percent, with notable SaaS companies like Salesforce, Intuit, Shopify, HubSpot, and Adobe recording gains ranging from 4 percent to a striking 24 percent for HubSpot. This recovery, however, isn’t universal-players like Atlassian and SAP remain down, highlighting divergent investor confidence within the sector.
SaaS stocks trade at substantial discounts despite solid earnings growth outlook
Even with recent improvements in share prices, many SaaS companies remain undervalued due to sustained selling pressure since last year. Bloomberg points out that a Goldman Sachs software stock basket currently trades at just 22 times forward earnings-less than half of its decade-long average. This disconnect exists despite steadily rising profit forecasts for SaaS firms heading into 2026.
Bloomberg Intelligence projects a 21 percent earnings growth for S&P 500 software and services companies this year, indicating strong fundamentals under the surface. The persistent pessimism among some investors contrasts with strong profit potential, laying the groundwork for a potential rebound.
This shift comes as many feared AI could disrupt traditional software revenue streams, but these concerns appear overstated so far. Deutsche Bank and others have yet to identify software businesses expecting negative AI-driven revenue impacts in 2026. That reassures investors who had been wary of the sector’s vulnerability to emerging AI technologies.
While the end of the SaaSpocalypse might be near, the uneven recovery within SaaS stocks suggests caution is still warranted. Companies with stronger revenue growth and AI integration strategies are rebounding faster, while others lag behind. Still, with valuations looking appealing and earnings outlooks positive, selective buying opportunities abound.