Despite the prevailing uncertain macroeconomic conditions, the software industry continues to grow due to the escalating demand for digital solutions across various businesses. Notably, the surge in cloud computing drives the need for software-as-a-service (SaaS).
Considering these factors, it could be wise to buy fundamentally strong software stocks DocuSign, Inc. (DOCU – Get Rating), New Relic, Inc. (NEWR – Get Rating), Informatica Inc. (INFA – Get Rating), and MiX Telematics Limited (MIXT – Get Rating).
Before diving deeper into the fundamentals of these stocks, let’s discuss why the software industry is well-positioned for growth.
While the tech sector faced challenges last year due to rapid rate hikes and heightened inflation, the tech-centric Nasdaq Composite has surged 29% year-to-date, primarily driven by the excitement surrounding generative AI. This rise in generative AI’s prominence is poised to impact software companies positively.
Businesses have proactively invested in digitalization efforts to enhance their operational efficiency and digital capabilities. Software companies play a pivotal role in this landscape by offering cloud-based services like Software-as-a-Service (SaaS) and Infrastructure-as-a-Service (IaaS). These offerings have gradually replaced traditional software programs.
The demand for SaaS is growing along with the ever-rising adoption of public cloud services across enterprises. According to Gartner, worldwide end-used spending on public cloud services is expected to rise 21.7% year-over-year to reach $597.30 billion in 2023. Also, the research firm expects SaaS spending to increase 17.9% year-over-year to $197.29 billion in 2023.
Global software spending is forecasted to rise 12.3% this year, with expectations of a further 13.1% growth in 2024, surpassing the trillion-dollar mark. Investors’ interest in software stocks is evident from the iShares Expanded Tech-Software Sector ETF’s (IGV – Get Rating) 33.6% returns year-to-date.
Let’s take a closer look at their fundamentals…
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