Software stocks are amid their worst drawdown in a generation, and the carnage just got worse. Intuit ((INTU Quick QuoteINTU - Free Report) ) plunged roughly 20% on Thursday after reporting fiscal Q3 earnings, bringing its total decline from last summer's all-time high of $813.70 to approximately 63%. That makes this the company's second worst drawdown ever, exceeded only by the 72% decline during the Dot-Com bust, and it happened while Intuit beat earnings estimates, raised full-year guidance, and continued growing revenue at double-digit rates.

Intuit is not alone. It is simply the most extreme example of a sector-wide repricing that has swept through enterprise software this year.

The iShares Expanded Tech-Software Sector ETF ((IGV Quick QuoteIGV - Free Report) ), which holds names like Salesforce ((CRM Quick QuoteCRM - Free Report) ), Adobe ((ADBE Quick QuoteADBE - Free Report) ), ServiceNow ((NOW Quick QuoteNOW - Free Report) ), and numerous other industry giants, cratered more than 24% in Q1 2026 alone, its steepest quarterly plunge since Q4 2008. At its April low of roughly $74, IGV was down 37% from its October 2025 peak. Even after a partial recovery to around $92, IGV remains well below its highs and has underperformed the S&P 500 by a historic margin this year.

The question facing investors now comes down to evidence. The thesis that AI agents will crush enterprise software sounds reasonable enough in theory, but is there actually enough evidence to support a structural shift? Because if not, some of the most dominant franchises in technology appear to be trading at exceptional prices.

Image Source: Zacks Investment Research

What is Driving the Selloff in Software Stocks?

The catalyst is agentic AI. The fear gripping investors is that autonomous AI agents will hollow out traditional SaaS platforms by automating the workflows those platforms were built to manage. If an AI agent can handle a CRM workflow, draft marketing campaigns, prepare tax returns, or generate design assets on its own, the argument goes that the per-seat subscription model that has powered software valuations for a decade begins to break down.

This is not a totally abstract concern as Google has disclosed that human-generated code has dwindled to 25% of its total. Goldman Sachs strategist Ben Snider has compared the future of software to that of newspapers, warning of "long-term downside risk" and suggesting this could be "the end of the beginning" of a decline, not its end.

The result has been indiscriminate selling. The software sector's forward price-to-earnings multiple has dropped below the S&P 500's. Short interest in software sits at record levels, and sentiment has swung to an extreme that has historically preceded recoveries, though that certainly does not guarantee one is imminent.

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Why Investors May Consider Buying?

Not everyone agrees that the sky is falling. JPMorgan's private bank argued in a recent note that investors are pricing in "worst-case AI disruption scenarios that are unlikely to materialize" anytime soon, calling full agentic AI replacement of enterprise software a "post-2028 story at the earliest." Morgan Stanley's software research chief Katy Huberty described the selloff as a "sentiment-driven" dislocation not justified by the underlying businesses. And even Nvidia CEO Jensen Huang, whose company stands to benefit enormously from AI adoption, has called the theory that AI will replace software "the most illogical thing in the world."

The bull case rests on a few key observations. Enterprise software is deeply embedded in large organizations through multi-year contracts, high switching costs, and mission-critical workflows that do not disappear because a new AI tool launched last month. Anthropic itself, whose Claude product is at the center of the disruption narrative, has been deepening its partnerships with software companies like Salesforce rather than trying to displace them, framing its AI as a productivity layer built on top of existing platforms, not a substitute.

Meanwhile, the fundamentals across the sector's largest companies remain remarkably resilient. The sector's largest companies continue to grow revenue at double-digit rates, Intuit at 12%, Salesforce at 10%, Adobe at 10%, ServiceNow north of 20% and earnings growing faster than that, even as their stocks have been cut in half or worse. These don’t appear to be the growth profiles of businesses being disrupted out of existence. And yet they are trading at historically cheap valuations, with Salesforce at 14x forward earnings, Adobe at 11x, Intuit at 13x, multiples that sit far below their long-term averages and the S&P 500.

Intuit: Shares are -63% from Highs

Intuit just reported fiscal Q3 results that, in almost any other environment, would have been celebrated. Revenue grew 10% year-over-year to $8.56 billion. Adjusted EPS of $12.80 beat consensus. Management raised full-year guidance to $21.34–$21.37 billion in revenue and $23.80–$23.85 in adjusted EPS. And yet shares collapsed roughly 20% after the company announced a 17% workforce reduction affecting over 3,000 employees and flagged weakness in its lower-end TurboTax Standard product, with mid-teens revenue declines in that tier.

At around $308, Intuit now trades at roughly 13x forward earnings on the raised guidance, which is a multiple you might associate with a low-growth utility, not a company generating $21+ billion in annual revenue, growing at double-digit rates, with dominant positions across tax preparation, small business accounting, credit monitoring, and marketing automation. The stock's 20-year average P/E ratio is in the mid-30s.

The bear case is that AI-powered tax preparation and accounting tools could erode TurboTax's moat over time, and the layoffs suggest management sees a meaningful structural shift ahead. But the market appears to be pricing in near-total disruption across the entire franchise, which is a much harder case to make.

Salesforce: Shares are -39% from Highs with a Top Zacks Rank

Salesforce has fallen from a 52-week high of $288 to roughly $175, a decline of approximately 39%. The stock now trades at around 14x forward earnings with a PEG ratio below 1.0, metrics that would have been unimaginable for Salesforce at any point in the last decade.

Yet the fundamentals remain strong. Fiscal year 2026 revenue of $41.5 billion, up 10% year-over-year. Free cash flow exceeding $16 billion. Agentforce and Data 360 ARR surging 200% year-over-year. Management guiding fiscal 2027 revenue to $45.8–$46.2 billion.

These are not the financials of a company being crushed by technological advances. And analysts are noticing, as CRM currently boasts a Zacks Rank #2 (Buy), with a positive Earnings ESP and marginally upward-trending estimates. Salesforce reports next on May 27, and the combination of a positive ESP with rising earnings estimates is encouraging.

ServiceNow: Stock is -58% off Highs

ServiceNow has been more than cut in half. Following a 5-for-1 stock split in December, shares have fallen from their adjusted highs to around $103, trading at roughly 25x forward earnings. For context, ServiceNow's 15-year average price to sales ratio is 13x, and a price to earnings multiple in the hundreds. Even adjusting for its maturation into profitability, the current multiple represents a historic low.

The company's most recent quarter showed subscription revenue growing north of 20%, with current remaining performance obligations accelerating. ServiceNow has arguably the strongest competitive position in the sector, as its platform is the operating system for enterprise IT workflows across thousands of large organizations, and its AI integrations (including its own agentic capabilities) are being deployed as enhancements to existing workflows rather than replacements.

Adobe (ADBE Quick QuoteADBE - Free Report) : Stock is -60% from Highs

Adobe has fallen from its 2024 highs above $630 to roughly $250, with a forward P/E of approximately 11x. The company's 20-year average P/E is nearly 38x. Adobe reported Q1 fiscal 2026 revenue of $6.40 billion, up 12% year-over-year, with non-GAAP EPS of $6.06 beating estimates. Yet the stock continued to slide on competitive fears from AI-native design tools and CEO Shantanu Narayen's announced transition.

At 11x forward earnings, the market is pricing Adobe as if its Creative Cloud franchise, is in terminal decline. The company recently authorized a new $25 billion stock repurchase program, signaling that management sees significant value in its own shares at current levels.

Are CRM, NOW, ADBE and INTU Shares an Opportunity or a Trap?

The honest answer is that it depends on your time horizon and your view of how quickly AI agents will mature from augmenting enterprise workflows to replacing them.

If you believe that agentic AI will fully displace traditional SaaS platforms within the next two to three years, then current valuations may still have room to compress. Goldman's newspaper analogy carries real weight, as the internet did eventually devastate print media revenues, even if it took longer than the market initially feared.

But if you believe that enterprise software is stickier than the market is currently pricing, hen stocks like Salesforce, Adobe, and Intuit represent a historically unusual opportunity to buy dominant franchises at valuations typically reserved for structurally challenged businesses.

For those who want broad exposure without picking individual winners and losers, IGV offers a diversified basket of the sector's largest names. Whether this proves to be the buying opportunity of the decade or just one more stop on the way down will depend on whether the fundamentals ultimately prove as resilient as the earnings reports suggest, or whether the market's AI disruption fears are, ahead of the curve.