Goldman Sachs Software Stock Picks 2026: Microsoft and Oracle Lead

TLDR

• Goldman Sachs launches U.S. software sector coverage naming Microsoft, Oracle, and ServiceNow as top investment picks
• Microsoft receives highest conviction rating with Azure revenue growth expected in 2026
• Oracle Buy rating based on improving capital expenditure visibility and anticipated profit recovery
• ServiceNow positioned to benefit from agent orchestration shift with strong workflow capabilities
• Adobe and Datadog face Sell ratings due to market competition and customer cost-cutting trends

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Goldman Sachs has launched coverage of the U.S. software industry with specific buy and sell recommendations. The investment bank identified three companies as strong buys and two as sells.

Analyst Gabriela Borges released the ratings as part of Goldman’s new sector analysis. The firm sees the software industry entering a “decade of agentic workflow” driven by AI technology.

Microsoft, Oracle, and ServiceNow received Buy ratings from the Wall Street firm. Adobe and Datadog were given Sell ratings based on competitive and pricing concerns.

Microsoft Tops Goldman’s Software Recommendations

Microsoft earned Goldman Sachs’ highest conviction rating among software stocks. The investment bank projects upside potential for Microsoft’s Azure cloud service revenue in 2026.

Microsoft Corporation, MSFT

Goldman praised Microsoft’s operational scale and strategic approach to growth. The firm believes Microsoft can expand its business while protecting profit margins effectively.

The analyst team highlighted Microsoft’s position in the cloud computing market. Azure’s growth trajectory remains central to Goldman’s bullish thesis on the stock.

Oracle secured a Buy rating based on improved financial clarity. Goldman expects Oracle’s profit growth to recover by 2026 after recent challenges.

The firm expressed optimism about Oracle’s role in AI-powered cloud infrastructure. Goldman anticipates accelerated growth as Oracle activates new data center facilities throughout 2026.

ServiceNow and the Agent Orchestration Opportunity

ServiceNow earned Goldman’s third Buy rating in the software space. The company stands to gain from the industry’s shift toward agent orchestration technology.

Goldman views ServiceNow’s workflow platform as a competitive advantage. The company’s artificial intelligence capabilities support its growth potential moving forward.

ServiceNow is branching into new software categories including customer relationship management and enterprise resource planning. These expansion efforts strengthen Goldman’s investment case for the company.

Borges emphasized that AI adoption will drive software market growth over five to ten years. She cautioned that year-to-year results may fluctuate during this transition period.

The key question for investors centers on profit sustainability from AI infrastructure spending. Goldman projects infrastructure software companies will increase gross margins from below 40% to above 60%.

Adobe received a Sell rating due to market dynamics in creative software. Goldman observed that new growth concentrates at the lower price points where competition intensifies.

Pricing pressure affects Adobe’s ability to maintain premium positioning. The firm noted Adobe’s difficulty attracting new users could limit future revenue expansion.

Datadog also earned a Sell rating from Goldman’s research team. The firm cited growing competition in the cloud monitoring and observability market.

Enterprise customers are prioritizing cloud cost reduction in 2026. This trend combined with competitive threats could constrain Datadog’s revenue growth rate.

Goldman expects these market forces to pressure Datadog’s stock price multiple. The firm maintains its negative view despite recognizing Datadog’s technical platform strength.

Borges stated that not all software companies will benefit equally from AI-driven demand. Goldman’s ratings reflect this selectivity in identifying winners and losers within the sector.

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