Salesforce's AI Partnership Sends Software Stocks Soaring Again

Software stocks have been on the wrong side of the AI trade for years. However, recent earnings from Salesforce (NYSE:) and other companies are starting to change that narrative.

Salesforce's latest earnings and guidance shocked the market, with a blowout quarter and a raised full-year FY27 revenue guidance to $46.1-46.4 billion. The stock's ticker (CRM) jumped about 22.6% after its fiscal Q2 results, and what's more interesting is that software companies are now integrating AI to strengthen their services.

Instead of trying to outdo artificial intelligence, software companies like Salesforce are partnering with AI players like Anthropic to deliver new products. For example, Salesforce has partnered with Anthropic to create a new product called Claudeforce, which puts Claude's reasoning on top of Salesforce data, workflows, business rules, and permissions.

The iShares Expanded Tech-Software Sector ETF (IGV) holds 106 stocks, including CrowdStrike (NASDAQ:), Salesforce, ServiceNow (NYSE:], and Adobe (NASDAQ:). This sector has been underperforming for over a year but is now showing signs of rotation. The IGV/SOXX ratio broke above its 50-EMA band in late July and continues to climb.

Other software companies like CrowdStrike, Okta, Workday, and Adobe are also reporting strong earnings, with AI driving significant revenue growth. For example, CrowdStrike reported Q2 revenue of $1.47 billion, up 26%, while record net-new ARR reached $333 million, up 51%.