--- title: "2 Software Stocks Turning AI Fears Into Fundamental Gains" type: "News" locale: "en" url: "https://longbridge.com/en/news/287242787.md" description: "Atlassian and Datadog stocks surged over 30% after strong Q1 2026 earnings, defying fears that AI would harm software revenues. Atlassian reported a 30% revenue growth and significant adoption of its AI assistant, Rovo. Datadog achieved over $1 billion in quarterly revenue, attracting high-value customers. Both companies are now seen as benefiting from AI, with positive technical signals indicating potential further gains." datetime: "2026-05-21T15:05:00.000Z" locales: - [zh-CN](https://longbridge.com/zh-CN/news/287242787.md) - [en](https://longbridge.com/en/news/287242787.md) - [zh-HK](https://longbridge.com/zh-HK/news/287242787.md) --- # 2 Software Stocks Turning AI Fears Into Fundamental Gains Software stock investors have had plenty of reasons to be bearish lately. New AI agents were expected to cut into valuable software revenue streams, and many analysts were ready to put the ‘per-seat’ business model on life support. But in the months following the software stock meltdown, a funny thing happened: these fears failed to materialize meaningfully in earnings. In fact, many of the companies with supposedly at-risk recurring revenue streams saw sales growth _accelerate_ in the first quarter of 2026, and these stocks are now trading well below their historic valuation levels. Is it time to nibble on software stocks? Sentiment toward the sector remains very negative, and Morgan Stanley flagged SaaS debt as a concern, noting that 46% of software loans mature over the next four years. But the apocalyptic predictions appear to have been off base, and many software companies now see AI as a tailwind. We’ll focus on a pair of software stocks that suddenly look appealing from a fundamental and technical perspective. ## Software Stocks With Bullish Fundamental and Technical Signals The iShares Expanded Tech-Software Sector ETF BATS: IGV is still down more than 10% over the last 12 months, but the downtrend has been neutralized. Strong earnings have already boosted several companies in the space, including large caps like Oracle Corp. NYSE: ORCL and Fortinet Inc. NASDAQ: FTNT. Software stocks are also starting to benefit from the tech sector rotation as investors look to move away from pricey memory and chipmaker stocks without exiting the market entirely. The following two companies both helped put a nail in the “AI will doom software” coffin with their Q1 2026 results. ### Atlassian: Cloud Acceleration Blows Up Per-Seat Compression Thesis One of the companies projected to take a hard hit from AI was Atlassian Corp. PLC NASDAQ: TEAM, which develops digital tools for workflow management. And for investors, the pain was real, as the stock is down nearly 60% in the last 12 months. However, the company reported its fiscal Q3 2026 earnings on April 30, and AI is now looking like a tailwind rather than a headwind. Atlassian easily surpassed Q3 earnings and revenue estimates, with earnings per share (EPS) figures smashing expectations by more than 20%. Revenue grew more than 30% year-over-year (YOY), but the adoption of the AI-powered assistant Rovo is what really had the market turning its head. Millions of users have already adopted Rovo into their Jira or Confluence cloud workflows, and the results have been exceptional: clients using Rovo reported more than double the annual recurring revenue (ARR) of non-users. The stock jumped nearly 30% in the session following the earnings release, which triggered several bullish technical signals. The bearish momentum had been waning since the end of February, as evidenced by the bullish crossover on the Moving Average Convergence Divergence (MACD) indicator. The MACD continued to show upward momentum through March and April before finally breaking above the histogram following the April 30 earnings pop. The stock now trades above its 50-day moving average for the first time all year, providing a solid technical backdrop to the company’s fundamental strength. ### Datadog: Beneficiary of Hyperscaler Workload Outsourcing Here’s a software stock that’s actually making new all-time highs in 2026. Datadog Inc. NASDAQ: DDOG soared more than 30% following its Q1 earnings beat on May 7, and the stock is continuing to creep higher ahead of some technical catalysts. The company’s Q1 2026 numbers eased any concerns about AI bleeding sales: over $1 billion in quarterly revenue (a first) and an EPS beat of more than 17%. The company is also attracting more lucrative customers as hyperscalers outsource their workload. More than 4,500 customers reported annual recurring revenue of $100,000 or more, an increase of more than 20% YOY. Many of these high-value customers are using Datadog’s GPUs to outsource their AI model training environments, generating a massive, resilient revenue stream. The stock received a wave of price target bumps following the report, including a new Street-high of $305 from Stifel Nicolaus. DDOG shares have now soared past their previous November high and could soon get a boost from a wave of technical signals. Like TEAM, the MACD hinted at accumulating bullish momentum before the earnings catalyst. Now that the breakout is underway, another technical catalyst is forming: a Golden Cross, which occurs when the 50-day moving average crosses above the 200-day moving average. The Golden Cross is often an “all clear” message for algorithmic traders to open new positions on a stock, so more highs could be on tap for DDOG this summer. ## Should You Invest $1,000 in Atlassian Right Now? Before you consider Atlassian, you'll want to hear this. MarketBeat keeps track of Wall Street's top-rated and best performing research analysts and the stocks they recommend to their clients on a daily basis. MarketBeat has identified the five stocks that top analysts are quietly whispering to their clients to buy now before the broader market catches on... and Atlassian wasn't on the list. While Atlassian currently has a Moderate Buy rating among analysts, top-rated analysts believe these five stocks are better buys. View The Five Stocks Here ### Related Stocks - [DDOG.US](https://longbridge.com/en/quote/DDOG.US.md) - [TEAM.US](https://longbridge.com/en/quote/TEAM.US.md) - [XDAT.US](https://longbridge.com/en/quote/XDAT.US.md) - [DOGD.US](https://longbridge.com/en/quote/DOGD.US.md) - [CLOU.US](https://longbridge.com/en/quote/CLOU.US.md) - [DTCR.US](https://longbridge.com/en/quote/DTCR.US.md) - [XSW.US](https://longbridge.com/en/quote/XSW.US.md) - [IGV.US](https://longbridge.com/en/quote/IGV.US.md) - [IXN.US](https://longbridge.com/en/quote/IXN.US.md) - [MS.US](https://longbridge.com/en/quote/MS.US.md) - [ORCL.US](https://longbridge.com/en/quote/ORCL.US.md) - [FTNT.US](https://longbridge.com/en/quote/FTNT.US.md) - [SF.US](https://longbridge.com/en/quote/SF.US.md) - [MS-O.US](https://longbridge.com/en/quote/MS-O.US.md) - [MS-Q.US](https://longbridge.com/en/quote/MS-Q.US.md) - [MS-E.US](https://longbridge.com/en/quote/MS-E.US.md) - [MS-I.US](https://longbridge.com/en/quote/MS-I.US.md) - [MS-L.US](https://longbridge.com/en/quote/MS-L.US.md) - [MS-P.US](https://longbridge.com/en/quote/MS-P.US.md) - [MS-A.US](https://longbridge.com/en/quote/MS-A.US.md) - [MS-F.US](https://longbridge.com/en/quote/MS-F.US.md) - [MS-K.US](https://longbridge.com/en/quote/MS-K.US.md) - [ORCL-D.US](https://longbridge.com/en/quote/ORCL-D.US.md) - [SF-C.US](https://longbridge.com/en/quote/SF-C.US.md) - [SFB.US](https://longbridge.com/en/quote/SFB.US.md) - [SF-B.US](https://longbridge.com/en/quote/SF-B.US.md) - [SF-D.US](https://longbridge.com/en/quote/SF-D.US.md) ## Related News & Research - [Atlassian’s New Flex AI Licensing Could Be A Game Changer For Atlassian (TEAM)](https://longbridge.com/en/news/286642450.md) - [ZAWYA: Veeam unveils intelligent ResOps for the agentic AI era, turning data context into faster, more precise recovery](https://longbridge.com/en/news/286763694.md) - [What's Karpathy, AI's top influencer, up to when he joined Anthropic?](https://longbridge.com/en/news/287068743.md) - [Salesforce CEO Marc Benioff Goes All-In on 'Awesome' Anthropic With $300 Million Spend, Hails Coding Agents: 'I've Never Been...'](https://longbridge.com/en/news/286647706.md) - [18:00 ETSubotiz Showcases AI-Native Revenue and Payment Platform at SaaStr AI Annual 2026](https://longbridge.com/en/news/286620167.md)