Top 6 Software Stocks to BUY NOW (High Growth Stocks)

I talk a lot about artificial intelligence, data centers, and how AI is going to impact many businesses. But in this video, I want to talk about that layer that might be a higher margin, stickier product, which is software. This application layer on top of artificial intelligence that might be the biggest beneficiary, yet most investors are leaving it behind. Now, I might be wrong and there's no guarantee, but these are the top six software stocks that I believe in will have the biggest comeback whenever it comes to appreciation in their stock price. Let's go ahead and jump in. So, first up, we have Microsoft Corporation, ticker symbol MSFT. Microsoft I don't really need to talk too much about. Most people know the breadth and span of their overall business. However, they are doing roughly $83 billion in overall revenue per quarter, growing at 18.3%, some of the fastest rates of growth that they've seen in their entire couple of year history right here. So, recency is showing major growth comparatively to where we were just a few years ago. Good sign. Another great sign is that in the past four quarters, one of the things that's growing faster than revenue is their overall operating income. This is actually showing that their margin is improving and that the company is getting more profitable over time. Now, whenever you combine both that growth rate and their adjusted EBIDA margin, what you end up getting is a rule of 40. They call it a rule of 40 because if you can get up to 40% combined growth and margin, that's a really good place to be for software stocks specifically. However, Microsoft, even though they're so big, is nearly double that rate, putting up roughly 77% rule of 40 growth rates. And a big part of this growth, maybe one of the more exciting sides is their cloud revenue side. See, although they are a software company and what backs stops all of the AI stuff is Microsoft 365, LinkedIn, Xbox, all of their ancillary products that continue to be very profitable for them. What you end up seeing is that the cloud business is growing at extreme rates both on Microsoft Azure side and the personal cloud side. But if you end up looking at Microsoft Azure, which is the really exciting AI side of the business, in the past four quarters, growth has been nearly 40% each and every quarter. And the only thing growing faster than that is their backlog, which means future growth for the cloud side could be even more exciting than what we've seen in the past, sporting a new remaining performance obligation of $633 billion. Now, the important part is, and I included this in the blue here, is how long that back date is expected to last. So whenever it was 45% you're essentially looking at just a little over a 2-year backlog. Today it's roughly sitting at 30%. So you're looking at a little over a 3.3year backlog which is a little bit longer which means there should be a little bit of a bump up. But those are signed contracts that they can potentially hold customers accountable if they don't end up paying. So even though it is a longer backlog, it's still exciting to know that customers are willing to sign up to pay Microsoft for their cloud business many many years in the future. And with all that backlog comes a major investment. And this is where a lot of people are pointing to Microsoft and saying they're spending too much. Microsoft just announced one of the largest single capacity additions in history. In Picos, Texas, we will build a new data center campus, expanding our global data center capacity by approximately 2 gawatt to meet strong and sustained customer demand for AI and cloud services across industries and regions. 2 gawatt can be as much as a 100 plus billion dollar buildout. It's a lot of money, but if there's any company that can afford it, it's Microsoft. Bringing in over $47 billion in cash from operations, they're one of the few companies that can actually build out at this scale that's coming from a lot of the software side, but end up flowing down into the AI portion of their business, giving external customers access to compute, but also themselves. Let's not forget that artificial intelligence, just like what we saw in Google, is the same thing that's also helping them promote Microsoft 365 and get a better average revenue per user because you can tie in co-pilot and many of their other frontier models that they're working on that is expected to come out in 2027 through that Microsoft product that already reaches hundreds of millions of customers. But yes, if there is a major red flag for Microsoft, it's the amount they're spending on new data centers that is helping promote all that growth in Microsoft Azure and potentially other products like we're seeing in Microsoft 365. As I said, Microsoft's now spending over $31 billion a quarter at the fastest growth rates that we've seen over many years. So, if this continues, you could get quarters that are spending 40 billion, $50 billion a quarter to set up data centers for future growth that's going to come obviously later on. So this is impacting free cash flow rate right now and you're seeing them sport about $15 billion where in the past we've been normalized to see these 20 plus billion free cash flow rate quarters and yet they only look to be accelerating their overall amount of spend which could hurt free cash flow in the near term. But unlike Google or Meta or any of these other companies that are looking to dilute shareholders to continue that growth, Microsoft still has a very healthy buyback program and dividend program giving back to shareholders approximately in the amount of roughly 1.8% of the overall outstanding share count. So whenever you think about that dividend that they pay that buyback, they are actually returning. And you could say if you are a value investor or a growth at a reasonable price, which is potentially what I would call myself, is that this is a pretty good shareholder yield for a company that's growing so fast. And yet the company over the past year has just fallen off a cliff in terms of its share price, but also and more importantly its valuation. Whenever we look at the price to earnings or forward price to earnings of this company, they've gone down from roughly being in the 40 times ratios all the way down to 23 times price to earnings and then a 21 times making it the second cheapest company in the mag 7 based on a forward price to earnings ratio. That's really cheap for a company growing in the high teens growth rates, increasing margin, 77% rule of 40. All of these statistics scream value to me and yet investors are selling off this name. But next we have Service Now. Ticker symbol N OW. Service Now is a very modern customer relationship management tool along with many other software products that is sporting still continuously 20 plus% growth rates on $3.7 billion of overall growth. But the most important thing that we see from Service Now is that each and every customer cohort per year ends up bringing on more and more services to the business. So the longer you've been with Service Now, the more you end up spending with them. That's a great sign of satisfaction from customers and knowing that they do not want to diversify away from Service Now. They want to work closely with them, even more closely than they were before. The number of customers that are spending more than $5 million per year with Service Now is really starting to spike and actually changing that trend in the most recent quarter is actually accelerating now. And although we say $5 million, that's the only category that they end up showing. The average customer that spends over $5 million, the average is actually $14.9 million. Way more than what they actually show off. But yet whenever we take a look at these statistics, you have accelerating average revenue per user and an accelerating amount of customers. That's a very good sign. Now, if there is a red flag for Service Now, it's within their customer renewal rate. But Service Now is being very vulnerable by showing this product because although they're growing the total amount of customers and that average revenue per customer is going up, a more appropriate sign for them to potentially hide this metric would be retention rates. because retention rates can also go up and it would hide some of the customers that end up falling off of the platform. They don't do this. They're showing it plain and simple. Hey, this is what our renewal rate is. We're being very vulnerable by doing this. But also put it into your mind that we're also seeing accelerated growth rates, which does not show up in renewal rate. And we're also seeing higher customer overall spend with us, which does not show up in renewal rate either. Not only that, but one of the only things that's growing faster than revenue at Service Now is their backlog. meaning that customers are likely to spend more than they have the years prior. And this slight dip down that we've seen quarter over quarter happens every year from December to March. This is a common occurrence and we're not seeing any break from their overall normalized amount of growth here. And yet, as what we're going to talk about here in a second, the valuation has changed drastically. Margins continue to stay extremely high in this company at over 80% on a subscription gross margin and total gross margin on a non-GAAP basis is staying almost at 80% at 79.5% in the most recent quarter. Let's continue on. Service Now is a growing net income positive business and that rule of 40 that they're sporting is roughly about 47%. Remember rule of 40. Anything higher than that is very exciting to see. But if we continue on, putting the metrics up against Microsoft is not the most exciting part for me. It's putting it up against other software names that potentially sport lower growth, lower margins, and yet a higher valuation. Service Now has shown this compounding annual growth over multiple years. And yet the company is willing to be traded right now at a 23 times forward PE where historically this has traded somewhere around 60 to 70 times. And then on a free cash flow basis, which is actually higher than their net income, you see a trailing price to free cash flow at 22 times and a forward price to free cash flow at only 16.7 times. The most important metric they're trading the cheapest on right now. Very interesting name, but maybe not as interesting for me personally as the next name here, Palunteer Technologies. Ticker symbol PLTR comes in as our third name. No rankings here in terms of which ones I like better. However, I have been purchasing a lot of this company recently in my own portfolio. Palanteer is the go-to software for the most important industries in the entire world. Whether you're looking at warfare pharmaceuticals healthcare utilities airlines financial institutions, a lot of these companies are using Palunteer at a faster and faster rate. Now, whenever I say faster, I truly mean it. And you're not going to see a lot of growth like this in any other video that I end up showing off because Palanteer just sports a growth rate and margin of their own. They are practically a one of one in the entire stock market, growing at over 84.7% sporting $1.6 billion of total revenue. So much smaller than a lot of the companies that we're going to talk about today, but the growth rate is much much higher. Not only that, it's the growth rate that is growing. So, we ended up growing this company by roughly 12% before and now this growth is now hitting over 84%. Mind you, Palanteer actually believes that they're going to see this above 100% for next year. And whenever you look at the growth rate of both government and commercial, they're two different segments. They're both growing in tandem, seeing both customer value that both the United States military and their own commercial customers are willing to pay for this company. And as we're going to go into margin, you're going to see they're willing to pay higher and higher prices for their overall products. Government overall contribution margin has now hit 73%. But a lot of people say that these government contracts, there's a little bit of price gouging. But on the commercial side, you're seeing the exact same thing at 72.7% and also seeing accelerated amount of growth on top of accelerated amount of margins. Now, this rule of 40 that's only shared by a couple of companies that are in extreme bottlenecks like you've seen in my past videos with AI companies like for example Micron might sport a very high rule of 40. You don't see this in software companies. The idea being that rule of 40 should be that 40% is the good metric. Now what if you triple it and then give even more on top of that? That is what Palanteer is doing right now. So they deserve a major premium. Overall customer counts are growing at high 30 or even 40% rates as of recently. And then on top of that, the net dollar retention rate is at 150%. This means that customers that ended up paying for a contract last year are likely to spend 1.5 times more the next year and then 1.5 times more the year after on the growth rate that they had previously. This is making their revenue skyrocket right now. But the only thing growing faster than revenue is how much customers want to spend on Palunteer the next year. Growing at over 135%, Palunteer's backlog is skyrocketing right now. Very good sign at over $4.4 billion. And we're even seeing contracts that are getting signed that are so long that Palunteer is actually being taken out of the bid system with the government and in fact just being put as a program of record saying no customer is able to compete with Palunteer so we're done searching. This is the company that we will work with. Very good sign from the Pentagon showing that the Maven system on Palunteer is so useful to them that they're willing to pay them the price that they are looking for. Hopefully, we see more contracts just like this because that's really going to give them a large premium. But on top of this, whenever we take a look at Palunteer's overall margins, you see this margin growing from 5% 3 years ago upwards of 53%, a 10x in the margin, which leads to a 40x in their overall net income per quarter because that growth rate has also accelerated from 12% up to 85%. That's a very good sign for Palunteer as well. And that's also flowing into free cash flow, showing a growth rate from 86 million up to $890 million, roughly an 11x on their overall growth rate on free cash flow as well. And one of the most interesting sides about Palanteer is that they now have $8 billion in cash and cash equivalents with 0 in debt. They could potentially do buybacks with this. However, they are a defense contractor right now. So, they're not currently allowed as of the Trump administration making that change, but potentially that will be changed in the future. And with $8 billion growing at over 47% year-over-year and likely to continue to grow alongside their overall revenue growth, what are they going to do with all this money? They could potentially do mergers and acquisitions or potentially look to put that back into sales and marketing to bump up the growth even further. The sky's is the limit whenever you have all of this money and no debt. Very, very good sign if you're a shareholder. And yet the price that people are willing to pay on Palunteer right now is some of the lowest prices that we've ever seen. Not from a share perspective, but on an actual valuation perspective at 126 times price to earnings and a forward price to earnings of 71 times. This is a very very good price to pay. And although it's much higher than the other companies that we've looked at, the growth rates and margins have been either three times, two times, or even way higher than the companies that we've looked at previously. So, you obviously are going to pay a higher price. But the fact that the valuation has come down so much makes you want to think if potentially they could continue to accelerate that growth rate and you're getting a deal on these shares, could that be a potential opportunity to make some real money here? And because their free cash flow like Service Now is higher than their net income, what you end up seeing is that the forward price to free cash flow is now at 57 times. Pretty interesting whenever we look through all the names that we will here today. And the most interesting part about Palanteer and one of the most exciting things just being an investor in general is that those forward estimates are not guaranteed. And that's based on Wall Street expectations. But as we look back at Wall Street expectations versus what has actually happened, take a look at what Palanteer has done. Constantly has greatly outperformed on a revenue side of what Wall Street has expected. And then on EPS, you're looking at a 33% beat, a 40% beat, 19% beat, 22% beat. Wall Street has no clue how profitable Palanteer will be, but it doesn't ever look like it's ever to the downside. Always Palanteer is beating to the upside and being more profitable than Wall Street ever could have expected. And for the fourth stock, we have Zeta Holdings, ticker symbol ZA. Zeta is what's known as an ad tech or marketing tech business that potentially helps commercial customers find customers that would be more likely to purchase their product at the best possible rates, helping them improve their overall return on ad spend. And although Zeta is one of the smaller companies that we're going to be talking about here today, they are extremely diversified, working with companies across all vectors. And one of the greatest signs, just like Palunteer, is that they're being used by the biggest companies in the world. They're serving 51% of the Fortune 100. That's actually showing a major sign that these customers, and we'll talk about this in a second, are utilizing Zeta more than ever. As you can see, this could potentially be why the technology that Zeta is end up putting out is putting themselves up against some of the best marketing tech companies in the world. In a recent Foresters report, Zeta was actually recognized as being an extreme leader. And as you can see here from this evaluation findings, Zeta goes to market with a memorable vision and makes sophisticated marketing simple. But let's jump into the numbers. Zeta is potentially at an inflection point here as the growth rate has now accelerated to nearly 50% year-over-year growth. And it's on the back of a brand new product that they ended up launching called Zeta Athena. Now, this is still a very US-based company, but the opportunity for them to grow into international markets is unbelievably huge. And we've seen other types of businesses in this space like the trade desk have explosive growth in international markets. But the trade desk is not able to really fend off a competitor like Zeta and Zeta has won a lot of contracts versus the trade desk and many other companies that we could potentially talk about like Salesforce as well just winning over a major contract from the gap as well. Now, while Zeta is not necessarily profitable right now, they are at an inflection point, as you can see on this chart, going from extremely negative overall profitability to potentially turning the tide and starting to see quarters that are actually putting up positive overall net income numbers. And I'll show you guys why that's an exciting prospect, but not the most exciting prospect. As Zeta is overall sporting a net dollar retention of over 128%. Which is extremely good. But not only that, the growth rate that we've seen versus previous quarters is where it really starts to shine. Customers used to potentially use them for 103% retention rate up to 113. And that was very exciting. They held that up for four potential quarters in a row, but now we're seeing another major spike up going from roughly 113 to 128% because of that Athena launch. Customers on the platform are growing by double digits, but each one of these customers is spending more and more with the platform over the last few years. But look at this slide, as this might be the most exciting slide to look at from Zeta. Their remaining performance obligations, their backlog just exploded since the Athena launch recently. And what you're seeing is that customers have signed up for roughly $71 million of future performance obligations from Zeta. And in two quarters, six months, that has exploded from 71 million up to $230 million. Completely changing how the customer relationship with Zeta has been working previously. Zeta's rule of 40 has also gone up to over 66% from being in that sort of 48 49 percentage range over the last four quarters. And we're seeing a really big inflection period here as well. And Zeta looks to sport this very high growth rate all the way to 2028. looking at implied 23% compounded annual growth rates with margins at over 25% instantly putting their rule of 40 at over 48%. This is what's known as a midterm guidance. And if you know anything about Zeta, they've shown off 18 quarters of continuously beating Wall Street expectations. If they want to put up these types of numbers, they're going to have to beat it with the reputation that they have upheld, which is putting out numbers and then crushing them. And a potential exciting way to do that is signing major contracts with potential customers that are going to lead you into other potential customers. Palunteer and Zeta ended up announcing a strategic partnership to build a unified data in AI infrastructure for the future of marketing. Now, I want to direct your attention to the bottom here where it says, "We believe this partnership can drive more than $100 million in annual revenue to Zeta in the incoming years and help define what winning looks like in the Agentic era." David Steinberg, the CEO, said that this is completely additive to their overall guidance and a very exciting sign for their business overall. And although I think Zeta has hit an inflection point here, I don't think that the market has caught up with potentially what could be happening in this company as both a forward price to earnings and forward price to free cash flow are now sitting at roughly 21 times. Now, like I said, this company is not profitable right now in the most recent quarter. So in order to have a forward price to free cash flow or forward price to earnings, they have to start making some real money and that's what the company in Wall Street is expecting. Now on to stock number five, we have Wix.com, ticker symbol WIX. Wix is an interesting name here and one that I wanted to include as the growth rates are not like what you're going to see from the other names that we've shown off. However, it's still 14% and they ended up showing off $541 million of overall revenue last quarter. This is based on their customers that are going to Wix to help have a very easy way to build websites. One of the most interesting things about this is that there's been a lot of people who have used Claude to potentially create websites that could potentially cannibalize Wix's business here. However, Wix knows this and they're doing the best moves ever to get ahead of this, which is to potentially cannibalize themselves. Wix ended up acquiring a company called Base 44. They are a website builder based on agentic tools that allows you to actually just type in the website that you want and automatically a website is created in the next two to three minutes. Very similar to claude and in fact it actually uses claude models and we'll actually talk about what else they're using their own potential models which have just been announced on June 29th. This could potentially end up lowering costs and really accelerate their margin here and we'll talk about that in a minute. But this company, which they just acquired in June of 2025, has already reached over $und00 million in ARR and making it one of the fastest growing software platforms in history. And truly, and we'll talk about this more, Base 44 is becoming a standout in the Agentic platform era and just dominating all of the other competition. Take a look at this similar web report that ended up comparing a lot of the other AI coding tools like Lovable, Cursor, Base 44, Replet, Bolt, and Windsurf. And take a look at the ones that are taking the biggest share of overall website traffic. Base 44 back in June of 2025 whenever they were acquired. And by the way, it was like for like $90 million. There was nothing. They sported roughly a 2% 2 to 3% of the overall market share. Today, they're looking at close to 20% of the overall market share. I think it's 19.4%. But that growth rate has to be given up by their competitors. And you can see how much Lovable has lost in this market share over that last little bit. Even Cursor has taken a little bit of a hit. Many of these companies, especially Bolt, new as well, is nowhere near where they were before. And the biggest gainer by far is base 44. And yet although they're one of the fastest growing companies on this entire list and ARR is whenever looking at just base 44 obviously it's not as big as these other companies but whenever you combine that with Wix they're one of the most profitable businesses actually the only profitable one but one of the highest in total annual recurring revenue and the lowest valuation on this list or at least one of the lowest actually bold right here is 700 million but $2 billion for nearly $2 billion of ARR that's not being seen anywhere on this list so you can buy a company here for a $2 billion valuation that's roughly doing $2 billion in annual recurring revenue, 21% free cash flow margins, growing overall amounts of platform revenue, transaction revenue is growing at 19%. Total gross payment volume is growing by 12%. Everything in this company is growing and yet this company is being priced so cheaply right now. 1.93 billion in revenue. Overall amount of registered users growing still. the amount of those customers as they stay on the platform continue to bring on more and more revenue to the platform. The rule of 40 and this is not an adjusted eBay rule of 40. This is a free cash flow rule of 40. Much harder to hit. 43% overall rule of 40 right there. Very good to see. And then on a forward PE basis, we're looking at 7.5 times. Drastically lower than any other company on this list. Drastically lower than the S&P 500 itself. And whenever we look at a price to sales, this is the amount of revenue that's coming onto the business. We're less than one times because obviously they're doing roughly $2 billion in revenue and they are being traded at roughly $1.94 billion. And yet cash is at $2 billion and they're buying back stock like crazy and they're overall growing still. Now, I'm not saying this without any red flags. There is obviously red flags. They just recently lowered their guidance. However, it wasn't a major hit. It was about a 10% cut on their overall guidance. Yet, the company ended up selling off another 25%, making it the valuation that it is today. And now, stock number six, which many would refer to like Wix's bigger brother, the more successful e-commerce platform, Shopify, ticker symbol HOP. Shopify is accelerating in their growth rates, and they are enabling customers just like Wix's to help set up their overall e-commerce platform. Rather than just a website builder, they're mainly focused on e-commerce. But Shopify has expanded from just helping the small businesses to potentially helping your favorite brands as they say things like Canada Goose or E.L.F. Sonos or L'Oreal or UGG or any of these other businesses. There are so many of these companies that are major major businesses that want to use Shopify rather than build their own website online. And why is that? It's really discovery and latency. Not only will Shopify help you connect to online stores and give you services for offline and connect you to Meta and Google and Amazon and all of these other services that you could potentially get. And the Shop app that has 100 million plus shoppers, all of these things is immediately tied into one Shopify admin. But the other part is latency. In the times that you need it most, you want to make sure that your shop does not go down. And many of the other platforms that you could potentially look to as being a commerce provider online could potentially face some severe issues if there's a lot of traffic during things like Black Friday shopping. Some companies rely very very heavily on very select shopping days like that and Shopify does not go down. They are really highlighting how good they are during the hardest of moments and that's why companies will be willing to pay a very high premium. Not only that, as it says here on the Innovate side, they've brought over 700 new features to the company in the last two years. If you want a platform that essentially is vibe coding brand new products so you don't have to and bringing it to you immediately, that's already work that's done that you can utilize in your business with a single click. You know that not only what you're getting today with Shopify, but what you could potentially be getting tomorrow for the same package that you're already paying for. things like Shopify payments, lowering the fees of paying someone like PayPal, but instead giving it over to Shopify. They'll help process that payment. In fact, the amount of payments that they process as a percentage of the overall payments that happen on their platform continues to rise over time. And one of the things that I love most about Shopify is they really are only winning if you're winning. The small percentage of their overall revenue is made on the subscription side. The large percentage of their overall revenue comes from helping you actually sell. The merchant solution side of their revenue means things like payments revenue and these sort of things. So, they are incentivized to help you win. They're extremely profitable in doing so. And in fact, whenever you look at their overall margins, they are only getting better over time. Margins are coming down, growth rates are accelerating, and we're seeing a consistent path of this happening multiple years in a row. Now, Shopify is a big commerce platform, so obviously a lot of their sales are going to happen around holiday seasons. So, the best way to look at them is in the last 12 months. So this is combining the last four quarters all together for each individual quarter. But you can see how not only this growth has continued to climb up, but look at the growth rate. We were growing gross merchandise volume 3 years ago at roughly 13%. Today it's growing at over 30%. And the amount of money that they're making for the amount of gross merchandise volume that's happening that is accelerating in its growth rate is also at some of the highest rates that they've seen in many, many years. And Shopify, although they utilize a lot of AI products, is a free cash flow machine because they're not actually setting up the data centers. This is a online capital light business enabling other people to make their money while they sit and actually just help with the software. And like every other name on this list, they're being sold off right now with a forward price free cash flow at roughly 56 times. Now, compared to other names on this list versus their overall growth, this is a little bit high, but it's because of their multiple years of total outperformance and a lack of having years that are like really disastrous. Aside from CO, which just a lot of growth was pulled forward, they really didn't even have a hard time during CO. They just ended up seeing investors get a little bit ahead of themselves only to draw back and then the stock ended up accelerating once again as they never let off the gas in terms of that overall growth. Now, I also wanted to highlight this not just for Shopify, although they are a founder-ledd business, but founder-ledd businesses often outperform the rest. Now, I also want to put a caveat for quasi founders. Business leaders who have come in like Elon Musk of Tesla didn't necessarily found the business, but took them over as their own. And you could see this across all of these companies on the list. Founder-led businesses like Alex Karps or David Steinbergs of Zeta or Toby Lucky of Shopify, right? 45 years of age continues to be extremely hungry and dominating in this industry. Those are the people that you want to bet on. But also with things like Bill Mcderman of Service Now. It's not necessarily his company, but he has adopted it of his own. Or even Satia Nadella of Microsoft for which this company has drastically grown in their overall users, amount of money that they're bringing in, profitability. The company has changed under Satia Nadella. The vision and everything. Although he is not the founder of Microsoft obviously, right? it's old enough where there's been a few handovers now. He has done an amazing job and probably only one other person which was Bill Gates. That's only because the company was very very young at that time. So ladies and gentlemen, let me know what you guys think about my list. What I see is companies with very heavy cash piles, low debt, an accelerating amount of growth rates, increasing margins, low low PE ratios. The valuations on all of these businesses are being extremely depressed. Historically software companies are capital A businesses which also looking in just like founder businesses capital A businesses have almost always outperformed capital intensive businesses right so could this be the next layer of artificial intelligence or the next layer of business application that could potentially be the one that's the stickiest most recurring amount of revenue high margin businesses that we as investors should be looking for. Let me know if there's a name on your guys' list that I should be potentially looking into in the comments down below. But if you guys haven't already, subscribe.