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Investing.com -- U.S. application software firms like DocuSign and Autodesk are entering a more competitive and uncertain phase, as private AI players are seeing accelerating revenue, leading Wall Street analysts to expect greater divergence across their software coverage throughout 2026.
Citi downgraded several major software firms and cut price targets—including DocuSign, Autodesk, NICE, Veeva, and SimilarWeb—citing a lack of near-term growth catalysts.
Citi downgraded Veeva from ‘Buy’ to ‘Neutral’ and slashed price target from $291 to $176. Autodesk was downgraded from ‘Buy’ to ‘Neutral’ with a new price target of $246, down from the previous target of $331.
SimilarWeb and DocuSign were downgraded to ‘Neutral/High Risk’ from ‘Buy/High Risk.
“We believe most of these are good companies, and may be well positioned long-term, but don’t have exciting 12-month catalysts,” Citi’s note to investors said.
Despite strong performance in late 2025, software stocks have declined sharply—down about 27% year-to-date—and face a tougher outlook amid slowing IT budgets, limited revenue acceleration, and increased competition from AI-native companies.
The rapid rise of artificial intelligence has been reshaping the global software industry, with new AI players expected to generate over $100 billion in additional revenue, far outpacing the growth of traditional software companies, according to a new Citi Research report.
Citi analysts warn that, historically, the software sector has added about $50–60 billion of net new ACV annually, but AI-driven revenues are now set to eclipse that figure in the coming years. Citi also highlighted risks to business models and long-term valuations, particularly as AI agents begin to automate workflows traditionally handled by software tools.
The major risk to software application firms is the fundamental shift AI is undergoing, from simply supporting users to independently carrying out tasks across various systems. Agentic models can now navigate applications, manage data, and execute complex workflows with minimal human supervision. This transformation is reshaping the competitive landscape of software.
While AI spending is largely additive, early signs suggest it is beginning to divert budgets away from traditional IT and software categories, especially amid tighter corporate spending and increased vendor consolidation.