The software industry is ever-changing, always trying to meet the current demands of the industry. With new and improved Software-as-a-service (SaaS) offerings and increased IT spending, the industry’s prospects seem robust.
Amid this backdrop, investing in fundamentally stable software stocks, HubSpot, Inc. (HUBS), Tyler Technologies, Inc. (TYL), and Microsoft Corporation (MSFT), which are actively streamlining business operations, could be the move for investors looking to capitalize on the sector’s growth.
SaaS continues to revolutionize the software market and the way businesses approach their operations. Driven by its flexibility and cost-saving nature, the SaaS model for different upcoming software has risen in popularity.
With more than 42,000 SaaS companies worldwide, organizations of various sizes use an average of 112 SaaS apps, up from an average of 80 in 2020. Additionally, businesses are utilizing groundbreaking innovations in AI to connect and unify workflows across previously disparate activities.
Otherwise known as Business Process Integration or Automation, the new system is being used by various organizations worldwide to connect silos of automation and data.
Spending on AI-enabled PCs, tablets, and mobile phones, as well as data center systems and other software solutions, are all expected to hike in the coming years, boosting the industry’s prospects. Driven by such trends, Gartner, Inc. (IT) predicts that worldwide IT spending will increase by 9.8% from 2024 to $5.61 trillion in 2025.
Now, let us dive deep into the fundamentals of three Software - Business stocks, starting with #3.
Stock #3: HubSpot, Inc. (HUBS)
HUBS provides a cloud-based customer relationship management (CRM) platform for businesses. Its CRM platform offers services, including Marketing Hub, Sales Hub, Service Hub, Operations Hub, and Content Hub.
On January 6, 2025, HUBS acquired Frame AI, an AI-powered conversation intelligence platform. The acquisition integrates Frame AI Breeze, HUBS’ AI that powers its customer platform and empowers its go-to-market teams to transform conversations into actionable intelligence.
On October 30, 2024, HUBS announced the acquisition of Cacheflow, a leading B2B subscription billing management and configure, price, quote (CPQ) solution. The acquisition allows the company to gain domain expertise in billing and CPQ and offer customers an experience that automates revenue management and shortens the sales cycle.
For the fiscal 2024 fourth quarter that ended December 31, 2024, HUBS’ total revenue increased 20.8% year-over-year to $703.17 million. Its non-GAAP operating income rose 34% from the year-ago value to $133.07 million.
Additionally, the company’s non-GAAP net income and non-GAAP net income per share grew 33.8% and 31.1% from the prior year’s quarter to $124.86 million and $2.32, respectively.
Analysts expect HUBS’ revenue and EPS for the fiscal 2025 first quarter (ending in March 2025) to increase 13.3% and 5.2% year-over-year to $699.44 million and $1.77, respectively. Also, the company has surpassed the consensus revenue and EPS estimates in all four trailing quarters, which is impressive.
HUBS’ stock has surged 15.4% over the past three months and 54.9% over the past six months, closing the last trading session at $770.95.
HUBS’ POWR Ratings reflect its sound fundamentals. The stock has an overall rating of B, translating to a Buy in our proprietary rating system. The POWR Ratings assess stocks by 118 different factors, each with its own weighting.
HUBS has an A grade for Growth and a B for Sentiment and Quality. Within the B-rated Software - Business industry, it is ranked #15 out of 40 stocks.
Click here to access HUBS’ Value, Momentum, and Stability ratings.
Stock #2: Tyler Technologies, Inc. (TYL)
TYL provides integrated information management solutions and services for the public sector. The company's offerings include platform and transformative technology solutions, data and insights solutions, and digital solutions. It has two segments, Enterprise Software and Platform Technologies.
On January 31, 2025, TYL announced the acquisition of MyGov LLC, a cloud-based software company with an integrated platform for managing and streamlining permitting, inspections, planning, and zoning. The acquisition strengthens TYL’s portfolio by providing community development, asset management, and additional services specifically tailored to towns, cities, and counties across the United States.
On January 28, 2025, TYL announced the signing of an agreement with the Iowa Department of Public Safety for its use of TYL’s Enterprise Public Safety suite, including Enterprise CAD, Enterprise Law Enforcement Records, and Public Safety Analytics, to integrate departments and enhance the flow of critical information.
The agreement showcases the company's commitment to public safety and allows the state of Iowa to deliver quicker, more streamlined, and more accurate services to its residents.
For the fiscal 2024 fourth quarter that ended December 31, 2024, TYL’s total revenues increased 12.5% year-over-year to $541.13 million. Its non-GAAP operating income rose 22.7% from the year-ago value to $131.77 million.
The company’s non-GAAP net income and non-GAAP net income per share grew 31.2% and 28.6% from the prior year’s quarter to $106.75 million and $2.43, respectively.
Street expects TYL’s revenue and EPS for the fiscal 2025 first quarter (ending in March) to increase 8.6% and 16.5% year-over-year to $556.65 million and $2.56, respectively. Also, the company has surpassed the consensus EPS estimates in three of the four trailing quarters.
Shares of TYL have surged 31.8% over the past nine months and 46.2% over the past year, closing the last trading session at $644.68.
TYL’s robust fundamentals are mirrored in its POWR Ratings. The stock has an overall rating of B, translating to a Buy in our proprietary rating system.
TYL has a B grade for Growth, Stability, and Quality. Within the Software - Business industry, TYL is ranked #14 out of 40 stocks.
To access TYL’s Momentum, Value, and Sentiment ratings, click here.
Stock #1: Microsoft Corporation (MSFT)
MSFT develops and supports software, services, devices, and solutions. The company offers a wide range of software and services, including Office, exchange, SharePoint, Microsoft Teams, LinkedIn, azure, SQL, Visual Studio, System Center, GitHub, PC accessories, and Xbox hardware.
On February 19, 2025, MSFT announced Majorana 1, the world’s first quantum chip powered by a new Topological Core architecture. Capable of solving meaningful, industrial-scale problems, the new chip can produce more reliable and scalable qubits. The innovation could enhance the company's position in the up-and-coming quantum computing market.
On the same day, MSFT released Muse, a first-of-its-kind generative AI model, primarily for game development. Coming with the ability to create consistent and diverse gameplay rendered by AI, the release marks a major step toward generative AI models that can empower game creators.
For the fiscal 2025 second quarter that ended December 31, 2024, MSFT’s total revenue increased 12.3% year-over-year to $69.63 billion. Its operating income rose 17.1% from the year-ago value to $31.65 billion. Moreover, the company’s net income and EPS both grew 10.2% from the prior year’s quarter to $24.11 billion and $3.23, respectively.
The consensus revenue and EPS estimates of $68.46 billion and $3.23 for the fiscal 2025 third quarter (ending in March) reflect a year-over-year increase of 10.7% and 9.7%, respectively. Moreover, the company has surpassed the consensus revenue and EPS estimates in each of the four trailing quarters, which is impressive.
MSFT’s stock has surged 2.7% over the past year to close the last trading session at $414.77.
MSFT’s POWR Ratings reflect its sound fundamentals. The stock has an overall rating of B, translating to a Buy in our proprietary rating system.
MSFT has a B grade for Stability, Sentiment, and Quality. Within the same industry, it is ranked #12 out of 40 stocks.
In addition to the POWR Rating highlighted above, you can check MSFT’s ratings for Growth, Value, and Momentum here.
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MSFT shares were unchanged in premarket trading Thursday. Year-to-date, MSFT has declined -1.60%, versus a 4.58% rise in the benchmark S&P 500 index during the same period.
About the Author: Aritra_Gangopadhyay
Aritra is a financial journalist dedicated to breaking down complex financial topics into simple, actionable insights. Holding a Master’s degree in Economics, he uses his analytical expertise to help investors uncover unique opportunities for long-term success.
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