3 Software Stocks to Own for Decades

Software is exponentially reducing operating expenses for businesses. Companies providing these solutions have enjoyed explosive earnings growth, with the industry outperforming the S&P 500 by 25.6 percentage points over the past six months.

However, only the most resilient software stocks will prevail in the long run, as AI erodes the profits of companies with lower switching costs. Here are three such software stocks that top our wish list:

1. Palantir (PLTR)

* Market Cap: $253.5 billion
* Founded by Peter Thiel to assist US defense agencies in the aftermath of the 2001 terrorist attacks, Palantir provides software-as-a-service that empowers government agencies and large enterprises to make data-driven decisions.

Why We Are Bullish on PLTR:

* Billings have grown by an average of 25.7% over the past year, indicating the acquisition of new contracts with potential for future value appreciation.
* Wall Street forecasts robust revenue growth of 29.5% over the next 12 months, exceeding its three-year trend.
* PLTR generates significant free cash flow, providing flexibility for growth initiatives or shareholder returns.

2. ServiceNow (NOW)

* Market Cap: $210.8 billion
* Founded by Fred Luddy, ServiceNow offers software that automates workflows across IT, HR, and customer service, helping companies streamline operations.

Why NOW Is a Top Pick:

* Long-term customer commitments are demonstrated by its 22.7% ARR growth in the last year.
* Operating margins of 12.4% indicate efficient operations and profitability.
* Strong free cash flow margin of 31.3% enables substantial capital reinvestment or return.

3. Zscaler (ZS)

* Market Cap: $31.34 billion
* Founded by Jay Chaudhry, Zscaler's software-as-a-service securely connects companies to applications and networks in the cloud.

Why You Should Buy ZS:

* ARR trends indicate a sustained flow of long-term contracts.
* Revenue growth is estimated at 19.8% over the next 12 months, continuing its positive momentum.
* Robust free cash flow margin of 28.4% provides ample options for capital deployment.

These software stocks offer resilience, growth potential, and financial flexibility for long-term investment success.