After a difficult 2025 in which investor anxiety around artificial intelligence weighed on valuations across application software names, Morgan Stanley sees a better sentiment backdrop emerging for 2026. The bank has flagged several companies that it believes are positioned to benefit from a reduced emphasis on perceived AI risk and from idiosyncratic growth drivers that could support positive estimate revisions.
This report identifies firms that combine platform characteristics, recent product innovations, or improving fundamentals that could translate into better investor recognition if execution holds. While Morgan Stanley does not expect broad-based upward revisions to consensus estimates across the software sector, it highlights selective opportunities where valuation or product adoption could create disproportionate upside.
HubSpot (NYSE: HUBS)
HubSpot maintained high-teens revenue growth through 2025 but experienced substantial multiple compression, with shares down about 55% on a next-twelve-months basis. As one of the more established platform vendors serving small and medium-sized businesses, HubSpot’s value proposition may become more important as front-office users look to extract AI-driven insights.
Morgan Stanley notes that upmarket momentum and consolidating multi-hub accounts could provide long-term growth runway. Additionally, credit consumption tied to strong AI product engagement is identified as a potential incremental upside catalyst. At roughly 4.5x EV/Sales, HubSpot trades at a discount to broader SaaS multiples near 5.5x, which the bank views as a relative-value consideration.
Analyst activity has varied: Stifel and BMO Capital have lowered price targets, attributing moves to software multiple compression and SMB-specific concerns, respectively. In contrast, Citi reiterated a Buy rating and placed the stock on a 30-day upside catalyst watch.
Klaviyo (NYSE: KVYO)
Klaviyo saw its EV/NTM Sales multiple compress by about 40% during 2025 amid investor questions around growth durability and potential competitive pressure from agentic commerce. Morgan Stanley describes Klaviyo as entering an emerging platform stage with its Service offering, which is a suite of tools designed specifically for direct-to-consumer brands, a segment the bank characterizes as historically underinvested.
Management indicates that full adoption of the expanded portfolio could drive a 2-3x uplift in ARPU, creating room for estimate upside while preserving what Morgan Stanley describes as best-in-class growth of at least 21-22% in 2026. The firm also observed operational evidence of customer engagement: Klaviyo reported that customers generated a record $3.8 billion in Klaviyo Attributed Value over the Black Friday weekend, a 27% year-over-year increase. The company added Chano Fernandez as co-CEO to share leadership duties with co-founder Andrew Bialecki.
Wix (NASDAQ: WIX)
Wix delivered accelerated revenue growth in 2025 despite facing difficult price-benefited comparables, yet its EV/NTM free cash flow multiple compressed by more than half over the year. Morgan Stanley points to several catalysts for 2026, including a growing contribution from Base44 and the introduction of a new Self-Creators product intended to re-engage Wix’s largest customer cohort.
Management has set a floor for blended business profitability at mid-20s FCF margin, and the company currently trades at roughly 6x EV/CY27 FCF. Improved execution against these targets could attract investors back to what Morgan Stanley views as a stable core business. The company’s board has authorized a $2 billion share and convertible note repurchase program for fiscal years 2026-2027, and Wix also launched Wix Harmony, an AI-powered website builder.
Amplitude (NASDAQ: AMPL)
Amplitude was upgraded to Overweight from Equal-weight on the view that the company can capture more digital product user behavior data as generative AI accelerates mobile and web application development. The firm has worked through optimization headwinds tied to COVID-era contracts and is now seeing tailwinds from expanded digital product development.
Multi-product adoption gives Amplitude a long growth runway, while its Agents product is cited as an opportunity to better integrate the portfolio. In the latest quarter, Amplitude reported 15.8% year-over-year organic growth in annual recurring revenue. The company also acquired InfiniGrow, an AI marketing analytics firm, to bolster its platform capabilities.
BlackLine (NASDAQ: BL)
Morgan Stanley lists BlackLine as its Back Office Top Pick, citing a high probability of positive estimate revisions and accelerating growth following three years of strategic adjustments. Q3 results showed strength, with new customer bookings up 45% year-over-year and average new deal size up 111%.
Management now expects gross bookings growth of 15% in Q4 and 20% in fiscal 2026, and it projects constant currency ARR to accelerate from 7% to 10-11% by Q4 2026. BlackLine acquired WiseLayer, a provider of AI-powered finance and accounting agents, to integrate into its platform. Separately, activist investor Engaged Capital announced plans to nominate four director candidates to the company’s board.
Descartes (NASDAQ: DSGX)
With shipping volumes likely past the trough, Morgan Stanley anticipates organic growth to accelerate into fiscal 2027 and calendar 2026 as Descartes continues to gain market share, enjoys easier year-over-year comparables, and benefits from a professional services refresh cycle. Following a recent 7% workforce reduction, the company is expected to realize increasing operating leverage that would help adjusted EBITDA growth accelerate to above 15% and EPS growth to exceed 20%.
Navan (NASDAQ: NAVN)
Navan is positioned as an AI beneficiary, using technology to automate customer service and travel agent tasks, which Morgan Stanley believes is contributing to market share gains. The firm highlights Navan’s proprietary travel content and data as creating a defensible moat. Navan trades at roughly 4x CY27 Sales, below peer valuations near 5x, while maintaining growth above 20%.
Morgan Stanley’s selections reflect a mix of front-office and back-office exposure across application software, with potential upside tied to product adoption, operational improvements, and targeted M&A. The bank emphasizes that while sector-wide estimate upgrades may be limited, company-specific catalysts could lead to meaningful revisions and valuation re-ratings if execution proves consistent with management guidance.
Methodology note: The bank’s assessment weighs recent growth trends, product rollouts, customer engagement metrics, and valuation differentials to identify names where the market may be underestimating future earnings power or cash flow generation potential.