Goldman Sachs Software Stock Picks: Microsoft, Oracle Top The List

TLDR

• Goldman Sachs analyst Gabriela Borges initiated coverage of U.S. software stocks with Buy ratings on Microsoft, Oracle, and ServiceNow
• Microsoft is Goldman’s top pick with expected upside to Azure revenue in 2026 due to scale and margin discipline
• Oracle received a Buy rating based on improving spending visibility and expected profit growth rebound by 2026
• ServiceNow is positioned as a winner in the “agent orchestration” layer with its workflow platform and AI tools
• Adobe and Datadog received Sell ratings due to competitive pressure, pricing challenges, and budget optimization concerns

Goldman Sachs has begun coverage of the U.S. software sector with clear recommendations for investors. Analyst Gabriela Borges identified three stocks to buy and two to avoid as the industry enters what she calls a “decade of agentic workflow.”

The investment bank named Microsoft, Oracle, and ServiceNow as its top Buy-rated picks. Adobe and Datadog received Sell ratings from the firm.

Microsoft Leads Goldman’s Software Picks

Microsoft stands as Goldman’s highest-conviction investment idea in the software space. The firm expects upside potential for Azure revenue in 2026.

Microsoft Corporation, MSFT

Goldman cited Microsoft’s scale and disciplined approach to business growth as key factors. The bank believes Microsoft can expand revenue while maintaining healthy profit margins.

Oracle earned a Buy rating from Goldman Sachs based on improving financial visibility. The firm expects Oracle’s profit growth to rebound by 2026.

Goldman expressed confidence in Oracle’s position within AI-driven cloud workloads. The bank anticipates growth acceleration as Oracle brings new data center capacity online over the coming year.

ServiceNow Positioned for Agent Orchestration Growth

ServiceNow received Goldman’s third Buy rating in the software sector. The firm sees ServiceNow as a primary beneficiary of the shift toward “agent orchestration” in software.

Goldman believes ServiceNow’s workflow platform gives it a competitive edge. The company’s AI tools position it to maintain strong growth rates.

ServiceNow is expanding into adjacent markets including CRM, ERP, and human capital management. These moves support Goldman’s positive outlook on the stock.

Borges stated that AI adoption will provide positive momentum for the software market over the next five to ten years. However, she warned that annual performance may vary as the technology matures.

The analyst emphasized that investor focus should center on which companies can convert AI infrastructure demand into sustainable profits. Goldman expects infrastructure software providers to increase gross margins from under 40% to over 60%.

Adobe faces challenges that led to Goldman’s Sell rating. The firm noted that growth in the creative software market is concentrated at the lower end.

Competition is increasing in this segment while pricing pressure mounts. Goldman warned that Adobe struggles to attract new users, which could prevent sustained double-digit growth.

Datadog also received a Sell rating from Goldman Sachs. The firm cited intensifying competition in the observability platform space.

Customers are focusing more on reducing cloud monitoring expenses in 2026. Rising AI-driven data volumes and competitive pressure could slow Datadog’s revenue growth.

Goldman Sachs believes these factors will weigh on Datadog’s stock valuation. The firm maintains this view despite acknowledging Datadog’s strong platform capabilities.

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