Software is rapidly reducing operating expenses for businesses. Companies bringing it to life have been rewarded with explosive earnings growth, and the upward trend shows no signs of stopping as the industry has posted a 42% gain over the past six months, beating the S&P 500 by 25.6 percentage points.

Although these businesses have produced results, only the best will survive over the long term as AI is eating into the profits of those with lower switching costs. Taking that into account, here are three resilient software stocks at the top of our wish list.

Palantir (PLTR)

Market Cap: $253.5 billion

Started by Peter Thiel after seeing US defence agencies struggle in the aftermath of the 2001 terrorist attacks, Palantir (NYSE: PLTR) offers software as a service platform that helps government agencies and large enterprises use data to make better decisions.

Why Are We Bullish on PLTR?

1. Billings have averaged 25.7% growth over the last year, showing it’s securing new contracts that could potentially increase in value over time
2. Demand for the next 12 months is expected to accelerate above its three-year trend as Wall Street forecasts robust revenue growth of 29.5%
3. PLTR is a free cash flow machine with the flexibility to invest in growth initiatives or return capital to shareholders

Palantir’s stock price of $115.99 implies a valuation ratio of 75.8x forward price-to-sales. Is now the time to initiate a position? Find out in our full research report, it’s free.

ServiceNow (NOW)

Market Cap: $210.8 billion

Founded by Fred Luddy, who coded the company's initial prototype on a flight from San Francisco to London, ServiceNow (NYSE: NOW) is a software provider helping companies automate workflows across IT, HR, and customer service.

Why Is NOW a Top Pick?

1. Ability to secure long-term commitments with customers is evident in its 22.7% ARR growth over the last year
2. Healthy operating margin of 12.4% shows it’s a well-run company with efficient processes, and its profits increased over the last year as it scaled
3. Strong free cash flow margin of 31.3% enables it to reinvest or return capital consistently

ServiceNow is trading at $1,013 per share, or 16.4x forward price-to-sales. Is now the right time to buy? See for yourself in our in-depth research report, it’s free.

Zscaler (ZS)

Market Cap: $31.34 billion

After successfully selling all four of his previous cybersecurity companies, Jay Chaudhry's fifth venture, Zscaler (NASDAQ: ZS) offers software-as-a-service that helps companies securely connect to applications and networks in the cloud.

Why Should You Buy ZS?

1. ARR trends show it’s maintaining a steady flow of long-term contracts that contribute positively to its revenue predictability
2. Estimated revenue growth of 19.8% for the next 12 months implies its momentum over the last three years will continue
3. Robust free cash flow margin of 28.4% gives it many options for capital deployment

At $207.28 per share, Zscaler trades at 11.3x forward price-to-sales. Is now a good time to buy? Find out in our full research report, it’s free.

Stocks We Like Even More

With rates dropping, inflation stabilizing, and the elections in the rearview mirror, all signs point to the start of a new bull run - and we’re laser-focused on finding the best stocks for this upcoming cycle.

Put yourself in the driver’s seat by checking out our Top 5 Growth Stocks for this month. This is a curated list of our High Quality stocks that have generated a market-beating return of 175% over the last five years.

Stocks that made our list in 2019 include now familiar names such as Nvidia (+2,183% between December 2019 and December 2024) as well as under-the-radar businesses like United Rentals (+322% five-year return). Find your next big winner with StockStory today for free.