Citi Q2 Software Preview: Palantir, Microsoft Among Top Picks
nashnova research
Citi named six preferred stocks ahead of Q2 software earnings, arguing that incremental AI budgets remain heavily concentrated in infrastructure and cloud platforms, with widening divergence across the software sector.
Who does Citi favor — and who does it avoid?
The buy list splits three ways: data infrastructure picks are MongoDB, Snowflake, and Palantir; cloud and AI infrastructure pick is Microsoft; application software picks are Figma and Shopify. All six carry buy ratings.
Price targets: MongoDB $455, Snowflake $320, Palantir $225, Microsoft $620, Figma $36, Shopify $156.
Least favored names are ZoomInfo and Adobe — Citi flags higher execution risk and delayed near-term bookings growth for both.
Why is the money flowing to AI infrastructure?
Citi's channel checks show overall IT budgets improving, but incremental spending is heavily concentrated in AI infrastructure, cloud platforms, and data-modernization projects.
This means → not every software company will share in the AI windfall. The closer a company sits to data and compute, the more likely it is to capture new budget dollars.
Citi's analysts wrote: "These companies remain the best vehicles to capture incremental enterprise AI spend, while many areas of software still face elevated competitive pressure."
Is Q2 IT spending actually recovering?
The latest CIO survey shows Q2 tech spending rebounded after a soft Q1.
Some previously deferred projects have restarted, and partner feedback indicates deals that slipped early in the year closed in Q2.
In plain terms = many enterprises hit pause in Q1; in Q2 they started filling the backlog.
What went wrong at ZoomInfo and Adobe?
Both companies sharply cut guidance last quarter — Citi sees this as reflecting structural pressure at each firm.
Adobe is navigating a simultaneous CEO and CFO transition, adding execution uncertainty.
ZoomInfo announced a 20% workforce reduction in Q1. Citi lists both as its least-favored names, citing execution risk compounded by slowing growth.
What is the one thing to watch this earnings season?
Citi frames a single key question: can the trend of AI budgets concentrating at the infrastructure layer be validated in Q2 earnings data?
This means → if the data confirms the trend, companies on the preferred list gain stronger earnings support; if not, market skepticism around AI monetization will intensify again.
Put simply = this earnings season is not about who is *talking* about AI — it is about whose revenue line actually shows AI-driven dollars arriving.
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