Software stocks show signs of recovery as strong earnings from Atlassian and Twilio help offset investor fears that artificial intelligence will render traditional SaaS business models obsolete.

Key Points

• Atlassian shares surged 35% on Friday following its most profitable quarter since 2021, while Twilio also saw gains exceeding 20%.
• The iShares Expanded Tech-Software Sector ETF has rebounded significantly after a 24% first-quarter decline, leaving it down only 3% for the year.
• Italian firm Bending Spoons agreed to acquire Airtable for under $1.3 billion, a sharp drop from the startup's $12 billion peak valuation in 2021.
• HubSpot and Datadog experienced 19% single-day stock drops last week, reflecting ongoing market anxiety regarding AI-driven competition.
• PitchBook data indicates that 86% of private deal value in the first half of 2026 went to AI companies, with no notable SaaS IPOs occurring this year.

Why it Matters

The volatility highlights a critical shift in investor sentiment as the market debates whether AI agents will cannibalize traditional software revenue or serve as a new growth catalyst. This uncertainty is forcing established software firms to prove their long-term value proposition while venture-backed companies face significant pressure to justify their pre-AI valuations.