Barclays has emphasized its positive outlook for the prospects of US software stocks in 2026, adjusting the ratings and price targets for several software stocks under its coverage. Analysts led by Raimo Lenschow stated, "We believe the outlook for software stocks in 2026 is favorable, supported by stable macroeconomics and IT spending, low valuation levels, and the sector's current lack of market favor." The analysts added that this year should see more significant revenue contributions from artificial intelligence (AI) in both application software, such as Salesforce.com, and infrastructure software, such as Oracle, which will help reverse market sentiment. The analysts pointed out that the performance of US software stocks lagged behind the broader market in 2025—the IGV software index rose 6%, while the S&P 500 index climbed 16%. The actual earnings reported by related software stocks were actually quite robust, but ongoing debates surrounding AI continued to put pressure on valuation multiples. Raimo Lenschow and his team stated, "We believe this situation will change in 2026. In our view, application software companies will gain growth support from easier year-over-year comparables, finally moving past the headwinds from the pandemic bubble period, while well-positioned vendors will begin to generate tangible AI agent revenue." "For companies in the infrastructure/computing space, we see a significant amount of remaining performance obligation (RPO) from 2025 starting to convert into revenue in 2026, which will make the excitement around AI feel more real." The Barclays analyst team noted that its top stock picks for the year are Salesforce.com (CRM.US), Oracle (ORCL.US), and DigitalOcean Holdings, Inc. (DOCN.US). The bank upgraded its rating for Descartes (DSGX.US), while simultaneously downgrading its ratings for Snowflake (SNOW.US), DoubleVerify Holdings, Inc. (DV.US), and GitLab, Inc. (GTLB.US). The analysts also elaborated on the rationale for adjusting the ratings of the aforementioned software stocks. **Descartes** Barclays upgraded Descartes from "Equal Weight" to "Overweight" and raised its price target from $106 to $105. The analysts believe that the company's latest reported Q3 FY2026 results represent a positive inflection point, but given its recent performance, this point is undervalued by the market. The analysts stated, "In our view, the most challenging period for the company is behind it, with Q3 organic growth re-accelerating from the multi-year lows seen in the first half of FY2026 due to certain tariff-related impacts." "We see sustained execution and easier comparables in the first half of FY2027 supporting stable or slightly improved underlying growth rates, and the company still has room to drive inorganic growth through small, tuck-in acquisitions over the medium term." "The current market environment and recent commentary from management suggest a favorable M&A environment for the company." The analysts noted that while they believe Descartes is emerging from the peak period of uncertain macroeconomic impacts, they emphasize that, from a long-term perspective, increasing supply chain and logistics complexity due to evolving regulations and requirements enhances the company's value proposition. Furthermore, the analysts believe the company has done an excellent job continuously building its platform, further differentiating it from competitive point solutions and enhancing the network effects of the Descartes platform, especially against the backdrop of emerging AI applications and new use cases in supply chain management and logistics software. The analysts said, "Consequently, we see potential for Descartes to outperform the market in calendar year 2026." **Snowflake** Barclays downgraded Snowflake from "Overweight" to "Equal Weight" and lowered its price target from $290 to $250. The analysts stated, "We still consider Snowflake a top-tier software asset, possessing one of the strongest revenue growth rates in our coverage universe and above-average free cash flow margins." "However, following a strong performance in 2025, we see limited upside potential ahead." Data shows that Snowflake's stock price rose over 42% in 2025. **DoubleVerify** Barclays downgraded DoubleVerify Holdings, Inc. from "Overweight" to "Equal Weight," maintaining its price target at $12. The analysts stated, "Over the past year, DoubleVerify's performance has significantly lagged behind the broader software industry." "While we observed strong revenue growth in the first half of 2025, the subsequent growth deceleration in Q3 raised questions about the sources of sustainable growth for this business." The analysts believe that while DoubleVerify's current valuation is cheap, they see no near-term catalysts to drive the stock price higher; its Activation business faces tougher comparables in the first half of 2026, and new products are not expected to positively impact performance until the second half of 2026. **GitLab** Barclays downgraded GitLab, Inc. from "Equal Weight" to "Underweight" and reduced its price target from $42 to $34. The analysts stated that GitLab's stock price has been under pressure due to factors including execution missteps, a challenging macro environment making it difficult to acquire new customers, increased competition, and persistent management turnover. The analysts said, "Over the past few months, the company has made adjustments to 'correct its course,' announcing a series of go-to-market strategy changes, integrating with leading open-source code generation tools, and increasing the size and quota allocation of its sales team." "However, our decision to downgrade is based on the view that these changes will take time to yield results, and GitLab will face tough comparables in FY2027 from the price increase of its Premium subscription service." Overall, the analysts expect GitLab is likely to underperform relatively throughout this year, hence the downgrade to "Underweight."
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