3 Beaten-down Software Stocks: 2 To Avoid And 1 To Buy
By Daniel Sparks – Mar 30, 2026 at 10:00PM EST
Key Points
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ServiceNow boasts the fastest-growing revenue out of these three, but its stock’s premium multiple demands near-perfection from here.
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Salesforce’s top-line growth rate is the lowest of the three businesses.
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Trading at just 14 times earnings, Adobe stock is by far the cheapest of the three. But is it the most attractive?
ServiceNow: Strong growth, no margin of safety
As far as business growth goes, ServiceNow is crushing it.
In its fourth quarter of 2025, the workflow automation company’s subscription revenue climbed 21% year over year to $3.47 billion.
And demand trends are impressive, too. ServiceNow’s current remaining performance obligations (cRPO) — a metric representing contracted revenue expected to be recognized over the next 12 months — surged 25% year over year to $12.85 billion during the quarter.
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NYSE: CRM
Salesforce
Today’s Change
(3.19%) $5.72
Current Price
$185.03
Key Data Points
Market Cap
$166B
Day’s Range
$179.76 – $186.38
52wk Range
$174.57 – $296.05
Volume
568K
Avg Vol
12M
Gross Margin
75.28%
Dividend Yield
0.93%
But the problem for prospective buyers is the price tag. Even after the recent software sell-off, ServiceNow trades at a price-to-earnings ratio of about 63 as of this writing. And its forward price-to-earnings ratio, which looks at a stock’s valuation as a multiple of analysts’ consensus earnings per forecast for the next 12 months, is lower but still robust at about 26.
At this valuation, the market is arguably pricing continued top-line growth at similar rates for years to come. Any slight deceleration in the company’s growth could lead to a severe rerating of the stock.
Salesforce: A cooling core business
Meanwhile, Salesforce continues to grow its revenue at a notable but meaningfully slower rate than ServiceNow’s.
In fiscal 2026 (the 12-month period that ended on Jan. 31, 2026), the customer relationship management platform specialist’s total revenue increased 10% year over year to $41.5 billion.
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NYSE: CRM
Salesforce
Today’s Change
(3.19%) $5.72
Current Price
$185.03
Key Data Points
Market Cap
$166B
Day’s Range
$179.76 – $186.38
52wk Range
$174.57 – $296.05
Volume
568K
Avg Vol
12M
Gross Margin
75.28%
Dividend Yield
0.93%
To be fair, the company is aggressively pushing its Data 360 platform and Agentforce AI offerings, which recently helped drive $2.9 billion in fourth-quarter recurring revenue. But these AI initiatives are attempting to reinvigorate a core business that has definitively cooled compared to its meaningfully higher growth rates several years ago.
With a price-to-earnings ratio of about 24, Salesforce’s valuation is much more grounded than ServiceNow’s premium multiple. But given its slower growth profile, the stock still does not look a clear buy.
Adobe: The clear winner
That leaves Adobe. The creative software giant’s stock has had a brutal start to the year, with s plummeting about 31% year to date as of this writing.
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NASDAQ: ADBE
Adobe
Today’s Change
(2.64%) $6.20
Current Price
$241.04
Key Data Points
Market Cap
$95B
Day’s Range
$237.05 – $243.28
52wk Range
$233.16 – $422.95
Volume
204K
Avg Vol
5.8M
Gross Margin
88.77%
But Adobe is still delivering solid double-digit growth — especially in the context of the stock’s cheap valuation. In its first quarter of fiscal 2026 (a period that ended on Feb. 27, 2026), Adobe’s total revenue rose 12% year over year to $6.4 billion.
Further, Adobe remains a cash-generating machine. The company’s trailing-12-month free cash flow came in at $10.3 billion. Measured against its market capitalization of about $98 billion as of this writing, this is a substantial sum.
This strong fundamental performance arguably makes the stock’s recent slide look an overreaction. As of this writing, Adobe trades at a price-to-earnings ratio of just 14. This is a staggering discount for a company with Adobe’s historical track record and high operating margins.
A calculated bet
Of course, there is a reason Adobe’s multiple has compressed so sharply. The market is increasingly worried about how generative AI could disrupt creative workflows and lower the barrier to entry for emerging competitors. If new AI tools, for instance, reduce the need for Adobe’s premium creative suites, the company’s pricing power could erode over time.
Ultimately, these risks are real, and investors should not dismiss them. But at 14 times earnings, the market has already priced in a significant amount of pessimism.
When comparing ServiceNow’s priced-for-perfection multiple, Salesforce’s more subdued growth trajectory, and Adobe’s deeply discounted valuation, Adobe stands out as the best choice in my opinion.
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About the Author
Daniel Sparks is a contributing Motley Fool stock market analyst covering technology, industrials, financials, and consumer goods. Daniel is the owner and chief investment officer of Sparks Capital Management. He holds a master’s degree in business administration from Colorado State University. The Globe and Mail profiled him and his investing philosophy in an article titled, “This stock picker is outperforming nearly everybody else. Here’s how he is doing it.”
Stocks Mentioned
Adobe
NASDAQ: ADBE
$241.04
(+2.64%)+$6.20
Salesforce
NYSE: CRM
$185.03
(+3.19%)+$5.72
ServiceNow
NYSE: NOW
$104.97
(+5.59%)+$5.56
*Average returns of all recommendations since inception. Cost basis and return based on previous market day close.
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