Companies are rapidly embracing cloud-based software for its flexibility and cost-effectiveness, fueling consistent growth in the SaaS sector. With advancements in AI and machine learning, SaaS platforms now offer enhanced automation, personalized experiences, and predictive insights, making these services increasingly valuable and efficient.

As a result, top Software-as-a-Service stocks like Salesforce, Inc. (CRM), Adobe Inc. (ADBE), and ServiceNow, Inc. (NOW) are hard for investors to overlook.

In today’s digital landscape, rising cyber threats make cybersecurity-focused SaaS solutions essential, fueling growth in secure, cloud-based models. As businesses further digitize, niche SaaS products tailored to industries like finance and healthcare offer specialized functionality, driving demand. Gartner projects a 20% increase in SaaS spending, reaching $247.2 billion by 2024.

Consequently, companies are increasingly investing in software services like Customer Relationship Management (CRM), content creation and management tools, and enterprise automation to enhance digital engagement and streamline operations. As a result, the software market is projected to reach $858.1 billion, with a 5.3% CAGR from 2024 to 2028.

Furthermore, the global Software-as-a-Service market is projected to grow at a 6.2% CAGR, reaching $325.84 billion by 2028. Let’s now dive into the fundamentals of the key Software-as-a-Service stocks highlighted above.

Salesforce, Inc. (CRM)

CRM provides Customer Relationship Management (CRM) technology that brings companies and customers together worldwide. The company's service includes sales to store data, monitor leads and progress, forecast opportunities, gain insights through analytics and relationship intelligence, and deliver quotes, contracts, and invoices.

On October 29, 2024, CRM introduced Agentforce, a customizable AI agent platform that autonomously handles business tasks across sales, service, marketing, and commerce. Using Agent Builder, users can easily create and deploy AI agents to automate processes, enhancing efficiency and customer experience without complex integration.

On September 17, 2024, CRM announced a partnership with NVIDIA to advance AI agents on the Salesforce platform, integrating NVIDIA’s AI tools to enhance customer interactions and productivity through autonomous agents and human-like avatars. This collaboration will empower businesses with faster, AI-driven insights and engaging real-time digital experiences.

In terms of the trailing-12-month EBITDA margin, CRM’s 25.63% is 153.5% higher than the 10.11% industry average. Likewise, its 76.35% trailing-12-month gross profit margin is 51.4% higher than the 50.43% industry average. Its 19.06% trailing-12-month EBIT margin is 270.5% higher than the 5.14% industry average.

CRM’s total revenues for the fiscal second quarter that ended on July 31, 2024, rose 8.4% year-over-year to $9.33 billion. Its non-GAAP income from operations rose 15.5% from the year-ago value to $3.14 billion. Similarly, the company’s non-GAAP net income and non-GAAP net income per share came in at $2.50 billion and $2.56 per share, up 19.1% and 20.8% over the prior-year quarter, respectively.

Street expects CRM’s EPS and revenue for the quarter ending October 31, 2024, to increase 15.9% and 7.2% year-over-year to $2.45 and $9.35 billion, respectively. It surpassed the consensus EPS estimates in each of the trailing four quarters. Over the past year, the stock has gained 48% to close the last trading session at $306.90.

CRM’s POWR Ratings reflect strong prospects. It has an overall rating of B, which translates to a Buy in our proprietary system. The POWR Ratings assess stocks by 118 different factors, each with its own weighting.

It has a B grade for Sentiment and Quality. Within the Software - Application industry, it is ranked #18 out of 130 stocks. To access additional grades for CRM’s Growth, Value, Momentum, and Stability ratings, click here.

Adobe Inc. (ADBE)

ADBE provides professionals, communicators, businesses, and consumers with a range of products and services to create, manage, deliver, measure, optimize, engage, and transact with content and experiences across diverse digital media formats. Its segments include Digital Media; Digital Experience; and Publishing and Advertising.

On October 14, 2024, ADBE announced major updates to Photoshop and Illustrator, introducing AI-powered features like Generative Fill and Generative Shape Fill to streamline workflows and enhance precision. These innovations, powered by Adobe Firefly, provide faster, more intuitive tools for creative professionals across digital and 3D design.

On the same date, ADBE announced the launch of GenStudio for Performance Marketing, a generative AI-first tool that helps marketing and creative teams create, manage, and optimize ad campaigns across multiple platforms with real-time insights and integrations.

In terms of the trailing-12-month Return on Common Equity margin, ADBE’s 35.36% is 721% higher than the 4.31% industry average. Similarly, its 31.60% trailing-12-month levered FCF margin is 194.8% higher than the 10.72% industry average. Additionally, its 25.59% trailing-12-month net income margin is 628.4% higher than the 3.51% industry average.

For the third quarter that ended August 30, 2024, ADBE’s total revenue increased 10.6% year-over-year to $5.41 billion. During the same period, its non-GAAP operating income grew 11.1% from the previous year to $2.51 billion. Additionally, its non-GAAP net income and non-GAAP EPS were $2.08 billion and $4.65, respectively, representing increases of 10.8% and 13.7% year-over-year.

Analysts expect ADBE’s EPS and revenue for the quarter ending November 30, 2024, to increase 9.4% and 9.8% year-over-year to $4.67 and $5.54 billion, respectively. It surpassed the consensus EPS estimates in each of the trailing four quarters. Over the past six months, the stock has gained 2.3% to close the last trading session at $504.83.

ADBE’s positive outlook is reflected in its POWR Ratings. It has an overall rating of B, equating to a Buy in our proprietary rating system.

It has an A grade for Quality and a B for Stability and Sentiment. It is ranked #27 in the Software – Application industry. Beyond what we stated above, we also have given ADBE grades for Growth, Value, and Momentum. Get all the ADBE ratings here.

ServiceNow, Inc. (NOW)

NOW provides enterprise cloud computing solutions that define, structure, consolidate, manage, and automate services for enterprises worldwide. The company operates the Now platform for workflow automation, artificial intelligence, machine learning, robotic process automation, process mining, performance analytics, electronic service catalogs and portals, data benchmarking, encryption, etc.

On September 10, 2024, NOW announced data enhancements to the Now Platform, including RaptorDB Pro, which improves transaction times by 53% and boosts analytics speed by 27X. A future addition, Knowledge Graph, will provide real-time data personalization across enterprise operations.

In terms of the trailing-12-month net income margin, NOW’s 12.77% is 263.5% higher than the 3.51% industry average. Its 7.25% trailing-12-month Return on Total Assets is 280.2% higher than the 1.91% industry average. Also, its 8.22% trailing-12-month Capex / Sales is 298.6% higher than the industry average of 2.06%.

During the third quarter ended September 30, 2024, NOW's total revenues rose 22.2% year-over-year to $2.80 billion. Its non-GAAP gross profit rose 23.2% from the year-ago quarter to $2.31 billion. Its non-GAAP net income rose 28.5% year-over-year to $775 million. Also, the company’s non-GAAP net income per share came in at $3.13, representing an increase of 27.4% year-over-year.

For the quarter ending December 31, 2024, NOW’s EPS is expected to increase 17.6% year-over-year to $3.66. Its revenue for the same quarter is expected to rise 21.6% year-over-year to $2.96 billion. NOW surpassed the consensus EPS estimates in each of the trailing four quarters. Over the past year, the stock has gained 63.2% to close the last trading session at $994.48.

NOW's positive outlook is reflected in its POWR Ratings. It is ranked #14 out of 39 stocks in the Software – Business industry. It has a B grade for Growth, Sentiment, and Quality. To see NOW’s Value, Momentum, and Stability ratings, click here.

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CRM shares were trading at $310.77 per share on Thursday afternoon, up $3.87 (+1.26%). Year-to-date, CRM has gained 18.62%, versus a 26.56% rise in the benchmark S&P 500 index during the same period.

Abhishek embarked on his professional journey as a financial journalist due to his keen interest in discerning the fundamental factors that influence the future performance of financial instruments.

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