The S&P 500 has climbed more than 7% year-to-date and 21% over the past 12 months, driven by the artificial intelligence boom and strong corporate earnings. Yet a growing number of software stocks are moving in the opposite direction, with several major names posting steep double-digit declines that have erased hundreds of billions in market value.
Intuit (INTU), Adobe (ADBE), The Trade Desk (TTD), Workday (WDAY), and Salesforce (CRM) are among the worst laggards in the index this year. Each has fallen by over 43% in 2026, and many are down more than 50% from their all-time highs. Intuit has dropped roughly 67% from its peak in July 2025, while The Trade Desk has cratered 87% from its record high, giving back all of its 2024 gains. Adobe has slid more than 70% from its peak, and Salesforce has fallen 57%.
The iShares Expanded Tech-Software Sector ETF (IGV) has declined for four consecutive weeks and is now 27% below its record high, reflecting the broad-based selloff in the sector.
What Is Driving the Software Rout?
Investors have coined the term “SaaS-pocalypse” to describe the growing belief that generative AI tools—such as Claude, Harvey, and Numeric—could disrupt traditional software-as-a-service business models. The concern is that AI assistants may replace or commoditize the functions that SaaS companies have long monetized through subscriptions and per-seat pricing.
In response, most major software firms have launched their own AI features. Salesforce introduced Agentforce for autonomous sales and service agents. Intuit rolled out Intuit Assist for automated accounting and tax preparation. Workday launched Illuminate for HR and finance, while ServiceNow, The Trade Desk, and Figma have all debuted similar AI-powered tools.
Despite these efforts, revenue growth has not accelerated meaningfully. Analysts project Adobe’s revenue will grow just 11% this year and 8% next year. Workday’s growth is expected at 11.6% in 2026 and 10% in 2027. Across the sector, the new AI features have yet to produce a material lift in top-line results, leaving investors skeptical about the near-term payoff from heavy AI investment.
Valuation Compression Accelerates
Beyond AI disruption fears, software stocks are undergoing a significant valuation reset. For years, these companies commanded premium multiples based on recurring revenue and high growth expectations. That premium has now largely evaporated.
Adobe currently trades at a forward P/E of roughly 8, Workday at 10, Salesforce at 10, and The Trade Desk at 9. These multiples are well below historical averages for the sector and reflect a market that is pricing in continued headwinds.
The valuation compression is also visible in private markets. Thoma Bravo’s $6.4 billion acquisition of Medallia in 2021 has seen its equity wiped out, with creditors including Blackstone, KKR, and Apollo taking control. Similarly, Vista Equity Partners wrote down $3 billion on its $3.8 billion purchase of Pluralsight after the company’s value collapsed.
Can Software Stocks Recover?
History suggests that deeply undervalued software names can rebound, but the timing remains uncertain. Some analysts argue that the market has overcorrected, pricing in worst-case scenarios that may not fully materialize. A rotation out of semiconductor and memory stocks—which have led the broader rally—could eventually channel capital back into beaten-down software names.
However, the recovery is likely to take time. Until AI features translate into measurable revenue acceleration, or until the “SaaS-pocalypse” narrative is disproven, the sector may continue to face headwinds. Investors are watching closely for signs of stabilization in forward guidance and for any shift in sentiment that could trigger a re-rating.
This article is for informational purposes only and does not constitute financial advice.
