Software-as-a-service (SaaS) stocks basked in investor adoration for a long time.
They were asset-light, generated recurring revenue, and had strong competitive moats.
However, AI’s breakthrough spoiled the party, raising uncomfortable questions about whether the technology could perform tasks that once required specialised software.
This forced investors to rethink a range of issues for SaaS stocks, from customer retention to pricing power, and competitive moats to future growth expectations.
These worries led to a significant decline in the stock prices of many SaaS companies, a reckoning that became known as the “SaaSpocalypse”.
But now, the narrative may be changing, as some software companies demonstrate that AI could be a growth opportunity.
Signs include revenue growth holding up, cash flow remaining strong, and AI becoming integrated with its products.
This doesn’t mean that all software stocks are off the hook – AI could well destroy many billions of market value.
However, some SaaSpocalypse victims may actually be attractive investments now.
Stock #1: Salesforce (NASDAQ: CRM)
Salesforce made its name providing customer relationship management (CRM) software.
It has 150,000 corporate customers, ranging from established Fortune 100 enterprises such as FedEx to newer companies like Box.
The SaaSpocalypse sent its share price plunging by 58% from the highs of December 2024 to the low in June this year.
However, CEO and founder Marc Benioff has been steadfast, consistently telling investors that Salesforce’s customers would not rip out their existing software and use AI to create their own services, especially in a critical function like CRM.
Salesforce also adapted, positioning itself as a “complete, trusted platform for this new era”, by unifying data, applications, AI agents, and engagement into one system.
It also recently announced a partnership with Anthropic, the frontier AI lab behind the Claude chatbot.
Salesforce’s revenue growth appears to be accelerating.
For its fiscal year ending January 2026 (FY2026), its top line grew by 9% on a constant currency basis.
The company expects revenue to grow by 11%, on the same measure, in FY2027.
This is also filtering down to free cash flow, which Salesforce is expecting to rise by 10% in the same financial year.
Salesforce is also returning capital to shareholders.
During 1QFY2027, as its shares were being pummelled by the SaaSpocalypse, Salesforce spent US$27.5 billion on share repurchases and dividends (the lion’s share was spent on repurchases).
This is a significant amount for a company that has spent a total of US$63.1 billion on repurchases and dividend payments since its founding.
The market has paid heed.
As of 17 September 2026, Salesforce’s stock price is up by about 66% from the June lows.
Stock #2: Microsoft (NASDAQ: MSFT)
Microsoft didn’t suffer as sharp a decline as Salesforce.
However, a peak-to-trough decline of 35% from October 2025 to June 2026 still represented a significant loss of value, especially for a company with a multi-trillion-dollar market capitalisation.
Yet, Microsoft retains key competitive advantages, including long-standing relationships with large enterprises the world over, and has built a reservoir of trust with these customers that AI cannot easily replicate.
Microsoft lacks its own frontier large language model (LLM), but can help large enterprise clients navigate the AI era by providing the infrastructure and expertise, while ensuring customers retain their core IP.
Far from being a drag on Microsoft’s business, AI might actually be making it more valuable.
Its top line grew by 18% in the financial year ending June 2026 (FY2026) to US$332 billion, an acceleration from FY2025’s growth of 15%.
Meanwhile, operating income was 21% higher at US$155 billion, also beating the comparable figure last year of 17%.
Microsoft is generating lots of cash – cash flow from operations in FY2026 was US$183 billion, 34% higher than a year ago.
However, it is also having to increase capex (capital expenditure), as shown in its net cash used in investing, which rose by 92% over the same period to US$140 billion.
Things could get dicey if this spend isn’t able to generate good returns.
However, for now, investors appear willing to give Microsoft the benefit of the doubt, with its stock price up 43% from the June lows as of 17 September 2026.
Stock #3: Adobe (NASDAQ: ADBE)
Adobe offers products that allow its customers, who range from individuals to small businesses, nonprofit organisations to global enterprises, to create, collaborate, and increase their creativity.
For example, its Creative Cloud business allows professionals to access photography, design, illustration and video apps.
Adobe’s stock price has found it hard going, with investors fearing that AI will replace the need for its products.
Despite rising by 33% from the June lows as of 11 September 2026, the stock price is still down by a whopping 61% over the past five years.
Revenue for the first nine months of its fiscal year ending November 2026 (FY2026) was US$19.8 billion, 12.5% higher than the same period a year ago.
This was actually an acceleration from the previous year, when revenue was up by 10.5% over the same period.
To prove its relevance in the AI era, Adobe will have to execute on its AI strategy, which includes integrating AI into its core applications, launching AI-first applications, designing and implementing AI agents to generate insights and content, and offering its own Firefly generative AI model.
The company is also counting on a US$25 billion share buyback to support the stock price.
Its ability to fund this is thanks to strong cash flows: The US$2.5 billion in cash flows from operations in 3QFY2026 was a third-quarter record.
Get Smart: The Software Winners Will Adapt
AI is forcing software companies to prove that their products remain valuable in a world where technology can perform more tasks than ever before.
The companies best positioned to emerge stronger are likely to be those with sticky customers, strong cash generation, genuine competitive advantages and a clear way to monetise AI.
The three stocks highlighted should therefore be judged not by how far their share prices have fallen or risen, but by whether their underlying businesses are becoming stronger.
Not all AI “winners” will survive this cycle.
But a few companies already have the scale, cash flow, and edge to pull ahead. We highlight what to look for in our FREE volatile market report. Download it here.
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Disclosure: Silas H. does not own shares in Salesforce, Microsoft, or Adobe.
