Top software application stocks to watch, according to Oppenheimer

Investing.com -- Oppenheimer analysts say the artificial intelligence transition in software has moved beyond experimentation and into a phase where companies must demonstrate measurable returns on investment. Enterprise AI spending remains strong, but customers and investors now focus on business outcomes rather than adoption metrics alone. AI is becoming a recurring operating expense, with chief financial officers evaluating investments alongside labor costs and demanding clear returns.

According to the firm, not all software companies are equally positioned to benefit from AI. The strongest setup exists among system-of-record vendors and businesses with seat-plus-consumption pricing models, which combine defensible customer relationships with direct exposure to rising AI usage. These models offer protection against disruption and the clearest path to AI-driven growth.

Here are Oppenheimer’s top picks in the software applications sector:

Microsoft Corporation

The firm highlights accelerating platform demand, disciplined capital allocation, and unmatched distribution across a massive installed base. Microsoft has already built a business with over $1 billion in AI-related revenue. Oppenheimer notes that as evidence of AI-driven revenue acceleration and margin durability builds, cash and earnings expectations for software companies should move higher, supporting valuation expansion across the sector.

ServiceNow

The company combines best-in-class growth and cash flow generation at scale with compelling medium-term targets, according to Oppenheimer. The firm notes ServiceNow’s exposure to durable automation and security tailwinds. Like Microsoft, ServiceNow has established an AI business exceeding $1 billion in revenue, separating it from competitors as AI monetization increases.

Braze, Inc.

Oppenheimer views Braze as a system-of-record for customer engagement and profitable growth, making it one of the most attractive risk-reward opportunities in their coverage universe. The firm emphasizes that durable competitive advantages are anchored in proprietary data, workflow context, deterministic functionality, and enterprise-grade security and governance.

The primary risk cited is that AI spending could crowd out broader software budgets and that margin pressure may persist longer than expected.

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