Key Takeaways
- Mizuho has identified Cloudflare, ServiceNow, and Atlassian as premier software investment opportunities heading into Q1 earnings
- Application software companies under Mizuho’s analysis have experienced a staggering 61% average decline over the past twelve months
- Forward-looking EV/Sales multiples now sit 40% beneath three-year historical averages, creating what Mizuho describes as compelling entry points
- Cloudflare’s 13% post-announcement decline following Claude Managed Agents launch is viewed as an excessive market reaction
- Mizuho reduced price objectives across multiple holdings, including Microsoft, Palantir, Check Point, and Datadog
Investment banking firm Mizuho has identified Cloudflare, ServiceNow, and Atlassian as standout software investment opportunities as companies prepare to report first-quarter financial results. Despite widespread valuation compression across the sector, the bank’s proprietary research indicates healthy consumption patterns and accelerating artificial intelligence integration.
Analyst Gregg Moskowitz spearheaded the research note released on Tuesday, timing it during a particularly challenging period for software equities.
Companies operating in the application software space within Mizuho’s research universe have experienced an average 61% drawdown over the trailing twelve-month period. Infrastructure-focused software businesses managed a modest 1% gain on average, while cybersecurity-oriented firms declined 22%.
Mizuho identified concerns surrounding AI-driven disruption as the primary catalyst behind the widespread selloff. The research highlighted that Software-as-a-Service companies have lagged infrastructure software by approximately 40 percentage points since February 2025.
Valuation metrics throughout the sector have undergone significant recalibration. According to Mizuho’s analysis, next-twelve-month EV/Sales multiples currently trade 40% below their three-year historical average. The firm characterized the present risk-to-reward profile as “quite attractive” for the coming twelve months, though it cautioned investors to anticipate volatility.
Cloudflare
Cloudflare received “favorable” assessment signals for the upcoming quarter. Mizuho anticipates another period of revenue performance exceeding guidance and projects a fourth consecutive quarter of accelerating revenue growth.
Shares declined 13% following Anthropic’s unveiling of Claude Managed Agents the previous Tuesday. Mizuho characterized this selloff as “overdone” and maintained its Outperform recommendation, while adjusting its price objective downward to $235 from $255.
ServiceNow
ServiceNow’s first-quarter industry feedback revealed stronger-than-anticipated large transaction activity, per Mizuho’s findings. The research firm noted that Pro Plus platform adoption continues advancing at an encouraging pace.
Agentic AI capabilities delivered through assist packages are building momentum within distribution channels, although Mizuho emphasized these developments remain in nascent stages. The firm projects ServiceNow will surpass its 20% year-over-year constant currency committed remaining performance obligations growth target.
Mizuho preserved its Outperform stance while reducing the price objective to $150 from $190. Shares currently change hands at approximately 12 times calendar year 2027 projected free cash flow.
Atlassian similarly retained its Outperform designation. Mizuho lowered its price target to $145 from $185 but continues forecasting substantial subscription revenue acceleration for a second consecutive quarter.
The research acknowledged that reduced partner compensation structures implemented several months prior may have constrained the information gleaned from channel intelligence. Nevertheless, Atlassian’s feedback exceeded certain competitive benchmarks.
Mizuho also adjusted price objectives downward for several additional portfolio companies. Check Point’s target dropped to $165 from $205. Microsoft was brought down to $515 from $620. Palantir saw a reduction to $185 from $195. Datadog’s target fell to $145 from $170.
The investment bank’s overall perspective on the software sector conveyed caution without outright pessimism. Mizuho reported that public cloud infrastructure and consumption dynamics appeared “generally good” and artificial intelligence adoption registered as “very strong” based on first-quarter channel checks.
