- SPT
- DOCU
- QTWO
Tech giants are pouring borrowed money into AI projects just as rates stay high and some earnings updates disappoint, and that mix is shaking confidence in growth-heavy stories. Investors who care about capital preservation are starting to look twice at software companies with recurring revenue, healthier balance sheets, and less reliance on massive capex bets. This article walks through three such stocks from our defensive screener that appear positively exposed to this AI funding reset.
The three stocks that follow are just a sample from this idea. The full screen surfaced 23 more software companies with recurring revenue and healthier balance sheets that also fit this defensive profile but are not covered below. To size up that wider field and quickly identify your own high conviction candidates, go straight to the Defensive, High-Recurring-Revenue Software Stocks screener.
Sprout Social fits this defensive software theme neatly because it sells subscription access to a social media management platform rather than big one off projects. This keeps revenue recurring while capital needs stay modest, even as AI tools deepen its offer.
Sprout Social runs a cloud based social media management platform on subscriptions. It generates about US$481.8 million from internet software and services, and with a market cap of roughly US$740 million it falls into the mid cap bracket for this screener.
“Trellis has become the most used AI feature on the platform with thousands of customers using it, active Trellis users are retaining at higher rates, and the paid Trellis Plus tier has already begun to see upgrades.”
Future returns from this stock now lean heavily on how one emerging pricing lever interacts with customer budgets and long term margins.
If that pricing lever is what matters most to you, go straight to the full narrative for Sprout Social to see how it could reshape returns and retention.
Q2 Holdings fits into the defensive, high-recurring-revenue software theme by running digital banking as a cloud subscription for financial institutions. It relies on long contracts and sticky integrations and involves relatively light capex compared with hyperscale AI spend stories.
Q2 Holdings provides digital banking, lending and fraud tools to US financial institutions on recurring SaaS arrangements. It generates about US$870 million from the sale, implementation and support of its platform and carries a market value of roughly US$4.1b.
“The increasing focus by financial institutions on digital transformation, evidenced by strong engagement and expanded investments in mission-critical digital banking, fraud prevention, and AI solutions, is likely to drive robust subscription revenue growth and improve retention for Q2 over the longer term. Continued cloud migration initiatives and operational efficiencies are forecast to deliver higher gross margins and EBITDA, with additional opportunities for margin expansion once the data center transition completes in 2026, directly benefitting net earnings over time.”
