US Software Sector Faces Earnings Validation Week After Summer Rally
Nashnova编辑部
Software shares have surged 18%–24% from their July lows, crushing chips and the broader market. This week Salesforce, CrowdStrike and three other heavyweights report — a direct test of whether the rally has fundamental backing or is just a mirage.
How big is this rally, and why is software leading?
The iShares Expanded Tech-Software ETF (IGV) has climbed 18% since its July 23 trough, outpacing the Nasdaq 100 and the "Magnificent Seven."
The S&P 500 Software & Services sub-index did even better — up 24% over the same stretch, versus just 3.3% for the S&P 500 overall.
This means → capital is rotating out of "AI pick-and-shovel" chip names and into "AI application-layer" software names. The style shift is already underway.
Why did the "long chips, short software" trade blow up?
The prevailing hedge-fund playbook was simple: chipmakers eat the AI capex boom, software firms get eaten by AI — so go long semis, short software.
Over the past month that trade reversed hard: the software index rallied 19% from its low while the Philadelphia Semiconductor Index fell 4.9%.
In plain terms = the market bet "AI kills software." Then earnings landed and showed software companies very much alive — so money flipped sides.
What do the earnings already in hand tell us?
Of the 13 S&P 500 software constituents that have reported, all 13 beat profit estimates, by an average of 10%. Only one missed on revenue.
Microsoft's July 30 report showed cloud-computing growth at a four-year high; the stock posted its biggest one-day gain since October 2008.
Palantir surged nearly 30% after its August 3 report. CEO Alex Karp called demand "other-worldly."
This reflects a clear signal: AI disruption to software, at least in this earnings season, has not materialized — no growth slowdown, no margin compression.
Who reports this week, and why does it matter?
Tuesday after the close: Intuit. Wednesday: Salesforce and CrowdStrike. Thursday: Autodesk and Workday.
All five are considered high AI-disruption-risk names. If they, too, beat expectations, the rally narrative becomes much harder to dismiss.
An extra signal: private-equity giant Silver Lake is reportedly in talks to acquire Workday. This means → a sophisticated buyer sees the "worst-case disruption scenario" as off the table — otherwise it would not bid at this price.
Are these stocks actually cheap?
The S&P North American Software Index trades at roughly 27× forward earnings, below its ten-year average of about 34×.
Individual names are even more striking: Salesforce at ~14× (ten-year average 43×); Workday at ~17× (five-year average 36×); Intuit below 14× (ten-year average ~32×).
In plain terms = by historical standards these companies are trading at a discount — but only if AI does not actually devour their businesses over the next few years.
The verdict: bargain or mirage?
Morgan Stanley analyst George Webb wrote on August 20: AI disruption risk is not gone, but resilient earnings, a diversifying foundation-model ecosystem, and early signs of AI monetization heading into FY2027 provide a better backdrop for bulls.
Consensus expects software-sector profit growth of about 15% in 2026, with revenue growth at 14.6% — estimates recently revised slightly upward.
Cresset chief strategist Jack Ablin framed it best: "The big question is whether this is a genuine bargain or an illusion." This week's earnings are the most direct window into the answer.
Content is for reference only, not financial advice.