It’s another earnings Friday here at What My System Says Today… and next week is shaping up to be a real doozy for software stocks.
No other corner of the market has been as directly impacted by the meteoric rise of AI as the ongoing AI boom… and in fact, recent releases by AI pioneer Anthropic and others have left Wall Street wondering if software as a business model is still viable.
Is this fear overblown? And could a blowout quarter by a handful of software companies put it to rest?
We’ll get to that in a second. First, let’s start with a bird’s eye view.
With earnings season now mostly complete, the S&P 500 Index is looking at the strongest quarterly revenue growth since 2022.
And perhaps most encouragingly, the revenue growth isn’t limited to just a handful of sectors. 10 out of 11 S&P 500 sectors are reporting year-over-year (YOY) revenue growth, as technology, communications, and health care lead the way with double-digit gains.
Energy is the only sector seeing its revenues fall slightly this quarter.
It’s a little ironic that the sector showing the biggest YOY jump in revenue – technology, at 21% – is one of the worst-performing sectors thus far in 2026, down about 2%. Meanwhile, the energy sector is up 22% this year despite its recent revenue decline.
Ultimately, it comes down to expectations. Tech stocks were priced with the expectation of sharply higher revenues. But as strong as the results have been, they just haven’t lived up to the hype. Energy was priced with rotten expectations, but the results have been less bad than feared.
Of course, AI is muddying the water for tech stocks. Rather than being a source of unlimited profits for software companies, AI is seen as an existential threat.
With all of that in mind, let’s examine potentially “bullish” earnings for next week…
“Bullish” Earnings to Watch
These stocks are expected to beat their previous quarter’s earnings per share (EPS). And if those expectations are met or exceeded, they could potentially trade higher.
For this screen, stocks must meet four criteria:
- Ten or more analysts cover the stock.
- The average analyst recommendation is a “Buy.”
- It BEAT analysts’ EPS estimates for the previous quarter.
- The average analyst estimate for the current quarter’s EPS is greater than the previous one.
Here are 10 companies that made this week’s list:
This list is heavy with software names. With the exceptions of soft drink and coffee maker Keurig Dr Pepper (KDP), off-price retailer TJX Companies (TJX) and AI chipmaker Nvidia (NVDA), literally every other business on the list sells software… and is presumably at risk of being upended by AI.
That’s Wall Street’s fear, at least.
Back in 2011, tech venture capitalist Marc Andreessen declared that “software is eating the world.” Now, AI has the potential to eat software from two angles. First, a reduction in the white-collar workforce potentially means fewer licenses to sell. But far scarier is the prospect that companies use improved AI coding tools to simply cut out the software vendor and make their own systems in-house.
Some of this may be fearmongering, but the fact is that the fat margins currently enjoyed in software may – at the least – get compressed by AI competition.
However it shakes out, Wall Street has been pricing in the worst. Autodesk (ADSK), the maker of specialized engineering and design software, is down 22% year to date. Salesforce (CRM) and Workday (WDAY) are both down over 30%. Tax and bookkeeping specialist Intuit (INTU) – the maker of TurboTax and QuickBooks – is down over 40%.
With sentiment this bearish, even a slight earnings beat paired with reassurances from management that the core products aren’t at risk of immediate obsolescence could be enough to help shares rebound.
Now, let’s look at potentially “bearish” earnings for next week…
“Bearish” Earnings to Watch
For our “bearish” earnings screen, we’re only looking for three things:
- Ten or more analysts must cover the stock.
- The average analyst estimate for the current quarter’s EPS is less than the previous quarter’s.
- We want companies that are covered by a sufficiently large group of Wall Street analysts who collectively expect the company to report a quarter-over-quarter decline in earnings.
Here are 10 companies that passed this screen:
Interestingly, both leading home improvement retailers Home Depot (HD) and Lowe’s (LOW) are reporting next week. And Wall Street’s expectations are low, as both are expected to see significant declines in earnings.
The frozen housing market has taken a toll on both retailers, as mortgage rates above 6% have suppressed home buying and selling, which limits renovation spending.
Inflation hasn’t helped either. Americans are finding their paychecks simply don’t go as far as they used to, and they’ve cut back on nonessential spending.
Finally, the tariffs have played a key role as well. Both Home Depot and Lowe’s depend heavily on imported goods, and they’ve been forced to absorb some of the tariff costs to keep their customers happy.
Of course, now that the Supreme Court has invalidated President Donald Trump’s tariffs and could require the Treasury to return the tariff money that has already been collected, both companies could enjoy a tax windfall.
No matter how it shakes out, it should be another very interesting week on the earnings front.
That’s all from me today.
Until next time…
Safe trading,
Matt Clark, CMSA®
Chief Research Analyst, Money & Markets