In this article, we will discuss the 10 Best SaaS Stocks to Invest In.
Mobile devices are now running more sophisticated and complicated software applications, which supports improving demand for SaaS solutions that can be accessed only with the help of an internet connection. As of now, continuous innovation has been helping businesses in running their operations globally. It continues to improve scalability and flexibility in data storage. Experts opine that the SaaS domain has been aiding in major decision-making and strategy-building as dynamic technologies such as AI and ML have been intersecting with it.
SaaS Growth Drivers for 2025
As per Fortune Business Insights, the global Software as a Service (SaaS) market size was pegged at US$273.55 billion in 2023 and is expected to grow from US$317.55 billion in 2024 to US$1,228.87 billion by 2032. The US SaaS market is expected to grow significantly, reaching an estimated value of US$236.69 billion by 2032, courtesy of the adoption of public and hybrid cloud-based tools by enterprises. Overall, the SaaS market growth is expected to be fueled by numerous factors such as an increase in the adoption of public & hybrid cloud-based solutions, integration with other tools, and centralized data-driven analytics.
As per Straits Research, increased demand for smart devices and their applications has been aiding the broader market. Notably, end-user demand for intelligent devices is supported by the expansion of email, instant messaging applications, and video calls. This is expected to contribute to the expansion of the SaaS market. Also, higher spending on cloud-based solutions by end-use businesses can accelerate the expansion of the broader SaaS industry over the upcoming years.
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Key Trends Likely to Help SaaS in 2025
With continuous advancements in technology, changing market demands, and increased dependence on cloud-based solutions, SaaS trends have been redefining the future of digital transformation for companies. Fortune Business Insights believes integrating AI and ML with SaaS Solutions will fuel broad-based market growth. This means that the adoption of AI/ML is expected to change the SaaS industry in many ways, mainly by improving the critical features of several software solutions. Notably, customizing & automating solutions, augmenting security, and improving human capacity are possible by incorporating SaaS solutions and AI/ML abilities.
Furthermore, SaaS has been continuously evolving and transforming services among cloud computing technologies. As per Fortune Business Insights, the key trending factors of SaaS are expected to continue to evolve and outline the future of cloud technologies, innovation, efficiency, and business values.
With this in mind, let us now have a look at the 10 Best SaaS Stocks to Invest In.
A close-up of a server running a cloud-native platform, symbolizing the power of the software-as-a-service (SaaS) business area.
Our Methodology
To list the 10 Best SaaS Stocks to Invest In, we used a screener and scanned through several online rankings. Next, we chose the companies that were popular among hedge funds. Finally, the companies were arranged in ascending order of their hedge fund sentiments, as of Q3 2024.
At Insider Monkey we are obsessed with the stocks that hedge funds pile into. The reason is simple: our research has shown that we can outperform the market by imitating the top stock picks of the best hedge funds. Our quarterly newsletter’s strategy selects 14 small-cap and large-cap stocks every quarter and has returned 275% since May 2014, beating its benchmark by 150 percentage points (see more details here).
10 Best SaaS Stocks to Invest In
10) DocuSign, Inc. (NASDAQ:DOCU)
Number of Hedge Fund Holders: 42
DocuSign, Inc. (NASDAQ:DOCU) is considered a SaaS business due to its ability to provide a cloud-based software platform enabling users to electronically sign documents, manage contracts, and automate workflows. JMP Securities reissued a “Market outperform” rating on the company’s shares, issuing a price target of $124.00 on 7th January. Deloitte believes poor agreement management practices and systems cost companies ~$2 trillion in annual global economic value as value destruction happens unevenly across functions.
DocuSign, Inc. (NASDAQ:DOCU)’s newly launched Al-powered Intelligent Agreement Management (IAM) platform can help such businesses to limit their losses. How? IAM streamlines the entire lifecycle of agreements- right from creation to execution, and beyond. Besides improving compliance and security, DocuSign, Inc. (NASDAQ:DOCU)’s IAM enhances visibility and tracking, making it easier to manage multiple agreements simultaneously. The company’s Al platform presents numerous opportunities for improving contract management and analytics capabilities.
With more organizations embracing cloud computing, the demand for cloud-based services like DocuSign, Inc. (NASDAQ:DOCU)’s electronic signature and agreement management platform increases. Furthermore, elevated demand for remote and hybrid work solutions can also act as a near-term growth catalyst. As companies focus on securing digital workflows, their integrated approach to e-signatures and identity management is expected to fuel significant upsell opportunities.
9) Shopify Inc. (NYSE:SHOP)
Number of Hedge Fund Holders: 56
Shopify Inc. (NYSE:SHOP) is well-placed to capitalize on the positive momentum seen in the SaaS industry as it provides cloud-based software solutions to allow merchants to build, customize, and manage online stores. RBC Capital Markets maintained its “Outperform” rating on the company’s shares, offering a price target of $130.00. The firm’s analysis showcases that Shopify Inc. (NYSE:SHOP)’s Q4 2024 performance is expected to be healthier than market anticipations, courtesy of Gross Merchandise Volume (GMV) and margin strength. Furthermore, the company’s significant total addressable market (TAM) and strong potential for sustained growth over the long term were the key reasons given by RBC Capital Markets.
The global e-commerce market continues to boom, and SaaS platforms like Shopify Inc. (NYSE:SHOP) allow businesses to rapidly launch and manage stores. Given that e-commerce will remain a key driver of SaaS adoption, the company is well-placed to capture more market share. Shopify Inc. (NYSE:SHOP)’s SaaS platform aids multi-channel selling (such as websites, social media, and marketplaces), making it a critical tool for businesses poised to benefit from the e-commerce boom. Its lower cost of ownership for enterprise merchants and exclusive products including Shop Pay, Audiences, and Shop Campaigns act as a competitive advantage.
The company’s strong focus on developing enterprise-specific features, like improved B2B capabilities and enhanced POS systems, places it well to capture a larger share of the enterprise market. RiverPark Advisors, an investment advisory firm and sponsor of the RiverPark family of mutual funds, released its Q3 2024 investor letter. Here is what the fund said:
“Shopify Inc. (NYSE:SHOP): Shopify was a top contributor in the third quarter following a strong second quarter earnings report that included better than expected revenue growth and substantial margin expansion. Gross merchandise value (the value of all items sold on the platform) growth of 22% was three percentage points above investor estimates, revenue of $2.0 billion was $50 million better and free cash flow of $333 million was $80 million better. A combination of new merchants to the company’s platform, increased adoption of SHOP’s offerings by existing merchants, and e-commerce market share gains are driving this revenue growth and profitability.
Last year, 10% of US retail e-commerce sales flowed through SHOP, second only to Amazon, and the company is still enjoying significant tailwinds as retail merchants of all sizes adopt SHOP’s software tools to display, manage and sell their products across a dozen different sales channels. We believe that the overall growth of e-commerce, combined with the development of new products and services, such as its digital wallet Shop Pay, should continue to drive revenue growth of more than 20% per year over the next several years, accompanied by re-acceleration of operating margin growth and FCF generation.”
8) HubSpot, Inc. (NYSE:HUBS)
Number of Hedge Fund Holders: 63
HubSpot, Inc. (NYSE:HUBS) caters to the SaaS industry as it provides cloud-based solutions for marketing, sales, customer service, and content management. RBC Capital Markets upped the company’s price target to $825 from $750, giving an “Outperform” rating. The firm is optimistic about HubSpot, Inc. (NYSE:HUBS) due to an accelerated adoption and revenue growth of newer hubs, such as Service, Payments, CMS, and Operations. The analysts believe that the Sales Hub is expected to represent a larger market opportunity as compared to the Marketing Hub, reflecting that its adoption has the potential to accelerate and contribute to revenue growth.
RBC Capital Markets expects an improvement in retention rates as a result of the success of HubSpot’s CRM Suite and multi-hub adoption, together with HubSpot, Inc. (NYSE:HUBS)’s shift towards enterprise customers. As per the analysts, such factors are expected to continue to enhance unit retention rates. Furthermore, the firm anticipates HubSpot, Inc. (NYSE:HUBS) to achieve sustainable FCF generation as product and operational levers get activated.
Scotiabank upped its price objective on the company’s shares from $700.00 to $825.00, giving a “Sector outperform” rating on 8th January. Scotiabank analyst Nick Altmann’s optimism stems from the significance of HubSpot, Inc. (NYSE:HUBS)’s partner network in fueling the company’s success. Considering the larger deal sizes and multi-hub deals, the company is well-placed to continue its growth trajectory.
7) Block, Inc. (NYSE:SQ)
Number of Hedge Fund Holders: 64
Block, Inc. (NYSE:SQ) operates as a Saas business via its suite of software solutions which aid businesses manage various aspects of their operations. Monness, Crespi, Hardt upgraded the company’s shares from “Neutral” to “Buy,” offering a price target of $115.00. The upgrade stems from the strong growth in Cash App’s monetization, user base, and inflows, which are well-placed for continued expansion in 2025. This optimism is also aided by the progress made on Cash App Pay/Card functionalities and the unification of apps. In Q3 2024, Block, Inc. (NYSE:SQ) generated a gross profit of $932 million, up 16% YoY and Cash App generated a gross profit of $1.31 billion, up 21% YoY.
Elsewhere, Raymond James analyst, John Davison, upgraded Block, Inc. (NYSE:SQ)’s stock to “Outperform” from “Market perform” on January 3. This upgrade came off the back of analysts’ views about merchant GPV, which is expected to improve in 2025. The analyst has a high degree of confidence that Seller GPV will accelerate into the double-digits in 2025. Furthermore, the merchant business can get a boost from new distribution deals, international expansion, and product innovation, says Davison.
The integration of Cash App and Square ecosystems demonstrates a strong opportunity for Block, Inc. (NYSE:SQ) to create a seamless financial platform for consumers and merchants. This integration is expected to result in higher user engagement, increased transaction volumes, and improved monetization rates. With businesses seeking out cloud-based software to manage payments, sales, customer relationships, inventory, and other operations, Block, Inc. (NYSE:SQ)’s suite of SaaS products will become attractive.
6) Snowflake Inc. (NYSE:SNOW)
Number of Hedge Fund Holders: 71
Snowflake Inc. (NYSE:SNOW) is a SaaS business because it delivers cloud-based software that enables companies to store, manage and analyze data. On 22nd January, Wedbush analyst Dan Ives reiterated an “Outperform” rating on the company’s shares, increasing the price target to $210. The analyst believes that Snowflake Inc. (NYSE:SNOW)’s product portfolio is expected to see strong demand trends after integrations of AI/ML capabilities.
Elsewhere, Piper Sandler exhibited confidence in the company’s stock as the firm upped its price target to $208 from $185, while maintaining an “Overweight” rating. Brent Bracelin, an analyst at Piper Sandler, mentioned Snowflake Inc. (NYSE:SNOW), Microsoft Corp., and Salesforce, Inc. as top picks to benefit from AI trends by 2025. The analyst opines that these companies are well-placed to take advantage of increasing enterprise investments. Several factors are expected to fuel Snowflake Inc. (NYSE:SNOW)’s growth, which include ongoing migration of data workloads to the cloud, higher adoption of AI technologies, and product portfolio expansion.
The company’s new products and AI initiatives are expected to start contributing more significantly to revenue in fiscal year 2026, which can further fuel growth rates. Baron Funds, an investment management firm, released a Q3 2024 investor letter. Here is what the fund said:
“Snowflake Inc. (NYSE:SNOW) is a leading cloud data platform predominantly used for data analytics. Shares fell 15.2% in the third quarter due to a cybersecurity incident, a shifting competitive landscape, a change in leadership, and general macro complexities which are pressuring customer IT budgets. With generative AI (Gen AI) front and center, both investors and customers are closely evaluating Snowflake’s positioning in the future data ecosystem. Databricks and other competitors whose core users are data scientists who are also key buyers of Gen AI technologies, are benefiting. In addition, while Snowflake’s product innovation push should fuel future growth, it may also lead to short-term headwinds to profitability. Management reported healthy demand for its core data analytics, evidenced by solid growth rates among current customers alongside new go-to-market initiatives that could support growth. We are optimistic the new CEO, Sridhar Ramaswamy, can lead the company towards an AI-centric strategy, and therefore remain shareholders.”
5) Datadog, Inc. (NASDAQ:DDOG)
Number of Hedge Fund Holders: 71
Datadog, Inc. (NASDAQ:DDOG) caters to the SaaS industry as it provides cloud-based solutions that deliver software and services over the Internet instead of on-premises infrastructure. TD Cowen analyst Andrew Sherman maintained a “Buy” rating on the company’s shares, setting a price target of $165.00. The analyst believes that Datadog, Inc. (NASDAQ:DDOG) is expected to exceed revenue growth expectations, with Sherman forecasting a growth rate of ~25%. Despite the challenging environment, the analyst sees a solid Q4 2024 performance, courtesy of enterprise demand.
While concerns are there regarding AI-native optimizations affecting pricing on renewals, Sherman doesn’t expect this to be a major obstacle. Additionally, Datadog, Inc. (NASDAQ:DDOG)’s strategic growth in sales and marketing is being viewed as a positive indicator of demand, with industry checks revealing healthy retention trends and elevated spending intentions, says Sherman. With businesses transitioning from on-premises systems to cloud-based infrastructure, there will be increasing demand for tools monitoring and securing such environments. Datadog, Inc. (NASDAQ:DDOG)’s unified observability platform is well-placed to aid this transition.
One of the company’s key initiatives is the introduction of LLM Observability, which is a tool focused on monitoring and managing AI applications. Brown Capital Management, an investment management company, released its Q3 2024 investor letter. Here is what the fund said:
“Other examples of negative sentiment include portfolio companies that reported earnings that met or exceeded expectations, but only saw their share prices go up slightly, stay flat or even decline. For example, Datadog, Inc. (NASDAQ:DDOG) is a leading SaaS-based, information technology (IT)-monitoring and analytics software platform for developers, IT operations and business users. The platform automates the monitoring of infrastructure, applications databases, networks, logs and security. Datadog’s platform is differentiated by providing a unified view of these systems via a visual interface configured to the needs of each user (i.e., a single pane of glass). Datadog delivered solid operating results in the second quarter of 2024, reporting revenue growth of 27% and raising 2024 full year revenue, operating income and earnings guidance. Despite these solid fundamental results, Datadog’s share price was down 11.8% in the third quarter. We speculate that these market reactions are evidence of the negative environment for high-growth companies. For more, please see the Detractors section below.
Datadog, mentioned above, automates the monitoring of infrastructure, applications databases, networks, logs and security. The company delivered solid operating results in the second quarter of 2024, reporting revenue growth of 27% and raising guidance for 2024 full-year revenue, operating income and earnings. Datadog noted improving consumption and demand trends among its enterprise customers and stabilizing trends among its small and mid-sized customers. On its earnings call, Datadog management disputed that it has interest in large acquisitions, notwithstanding news articles on July 17 that Gitlab was seeking a buyer and Datadog is among the potential suitors. Despite solid fundamental results, Datadog’s share price underperformed in the third quarter of 2024. This may be due to its premium valuation and investor worries about Datadog’s ability to sustain its current strong revenue growth in a softer economic environment. We remain confident in Datadog’s ability to deliver durable growth over the long term. We believe Datadog has a massive and underpenetrated total addressable market that is growing about 10% annually. We also believe Datadog has a strong competitive positioning in infrastructure monitoring and is gaining market share.”
4) ServiceNow, Inc. (NYSE:NOW)
Number of Hedge Fund Holders: 78
ServiceNow, Inc. (NYSE:NOW) caters to the SaaS industry as it offers cloud-based software solutions to enterprises. Its subscription revenue, which is a key metric for Saas businesses, went up by 23% YoY in Q3 2024. This growth stemmed from the strong adoption of ServiceNow’s core IT Service Management (ITSM) offerings and the expansion of its product portfolio. Notably, the calculated Remaining Performance Obligations, which indicates future revenue potential, increased 23.5% YoY in constant currency, compared to the previous quarter’s 22.5% growth.
On 16″ January, Cantor Fitzgerald initiated coverage of the company’s stock, giving an “Overweight” rating and a $1332 price target. The rating was backed by ServiceNow, Inc. (NYSE:NOW)’s move to strengthen its growth metrics with Cuein acquisition amid elevated Al adoption. As a result of the acquisition, the company has access to a leader in Al native conversation data analysis and insights. Cuein is expected to contribute to ServiceNow Al Agents’ efficacy.
ServiceNow, Inc. (NYSE:NOW)’s healthy position in IT Service Management (ITSM) offers a strong foundation for expansion into adjacent markets including Customer Service Management, HR service delivery, and field service management. Investment advisory firm Ithaka Group released the Q4 2024 investor letter. Here is what the fund said:
“Founded in 2004, ServiceNow, Inc. (NYSE:NOW) has become the leading provider of cloud-based software solutions that define, structure, manage and automate workflow services for global enterprises. ServiceNow pioneered the use of the cloud to deliver IT service management (“ITSM”) applications. These applications allow users to manage incidents and to plan new IT projects, provision clouds, manage application performance and build applications themselves. The company has since expanded beyond the ITSM market to provide workflow solutions for IT operations management, customer support, human resources, security operations and other enterprise departments where a patchwork of semi-automated processes have been used with varying success in the past. ServiceNow’s stock rose during the quarter, driven by strong fundamental performance and growing investor recognition of the company’s dominant position in monetizing AI workloads.”
3) Workday, Inc. (NASDAQ:WDAY)
Number of Hedge Fund Holders: 84
Workday, Inc. (NASDAQ:WDAY) is a leading player in the SaaS industry as it offers cloud-based enterprise software for HR, financial management, and planning. Deutsche Bank analysts renewed confidence in the company’s stock as they upgraded it from “Hold” to a “Buy” rating, increasing the price target to $300 from $265. This upgrade demonstrates confidence in Workday, Inc. (NASDAQ:WDAY)’s solid fundamentals and potential for sustained revenue growth. In Q3 2025, the company’s total revenues came in at $2.160 billion, reflecting 15.8% growth YoY, with its subscription revenues coming at $1.959 billion, a 15.8% growth from the same period last year.
The company’s performance in Q3 2025 stemmed from the global momentum around its AI-driven innovations and the strength of its partner ecosystem. Deutsche Bank outlined 3 key drivers for Workday, Inc. (NASDAQ:WDAY)’s mid-teens revenue growth expectation over the coming years. These include a strong back-to-base motion that can leverage organic and inorganic innovation, improvements associated with go-to-market productivity, and elevated traction in Financial Management Solutions and Human Capital Management in the Middle and Emerging Enterprise segment.
The broader growth in the SaaS industry focuses on integrating platforms that unify workflows. Workday, Inc. (NASDAQ:WDAY)’s unified HCM, finance, and planning solutions focus on meeting a demand for end-to-end systems that reduce complexity and improve efficiency. With SaaS adoption expanding beyond large enterprises and into mid-sized businesses, the company is well-placed to cater to this broader market. Polen Capital, an investment management company, released a Q3 2024 investor letter. Here is what the fund said:
“We added to several existing positions in the quarter including Adobe, Workday, Inc. (NASDAQ:WDAY), Shopify, MSCI, and Paycom Software. Workday is still growing revenue at a mid-to-high-teens rate, but in recent years, slower macroeconomic growth has made closing deals more challenging. Amidst a pullback, we increased our position as we found the valuation attractive for a well-positioned, recurring revenue business with still strong growth potential. The company also recently stated publicly that it will be focused on expanding profit margins meaningfully over the next five years—something we have expected and are pleased to see.”
2) Intuit Inc. (NASDAQ:INTU)
Number of Hedge Fund Holders: 87
Intuit Inc. (NASDAQ:INTU) caters to the SaaS industry as it provides cloud-based software solutions via a SaaS model. Mizuho Securities analyst Siti Panigrahi has reiterated the bullish stance on the company’s shares, giving a “Buy” rating on January 10. This rating is backed by a combination of factors such as Intuit Inc. (NASDAQ:INTU)’s strategic focus on the tax business and potential for double-digit growth in the 2025 fiscal year. The company is focusing on a 2-pronged strategy to ramp up its TurboTax Live service and re-engage with low-end filers, which can fuel significant growth.
Notably, the pricing for TurboTax is largely consistent, but elevated usage of higher-priced services and reduced discounts can fuel its ARPR growth. With businesses and individuals shifting to cloud-based solutions for financial management, accounting, tax, and personal finance needs, Intuit Inc. (NASDAQ:INTU)’s SaaS products such as TurboTax, and QuickBooks Online are well-placed to address the growing demand. The company’s QuickBooks can cater to small businesses and larger companies, enabling them to expand within Intuit Inc. (NASDAQ:INTU)’s ecosystem as they scale up.
The company’s emphasis on operational efficiencies and subscription momentum can fuel continued margin expansion, with healthy operating margin growth expected for FY 2026. Also, the integration of GenAl technology throughout Intuit Inc. (NASDAQ:INTU)’s platform provides a significant opportunity for monetization and service enhancement. On December 19, Deutsche Bank maintained a “Buy” rating with a price target of $750.00. Parnassus Investments, an investment management company, released a Q3 2024 investor letter. Here is what the fund said:
“Intuit Inc. (NASDAQ:INTU) shares fell despite the financial software company posting strong quarterly results. The company’s pricing-dependent long-term guidance concerned investors. However, we continue to believe Intuit’s customer growth and relevant platform will sustain its wide moat and long growth runway.”
1) Salesforce, Inc. (NYSE:CRM)
Number of Hedge Fund Holders: 116
Salesforce, Inc. (NYSE:CRM) is in the SaaS industry as it provides cloud-based software solutions that are hosted and delivered over the internet. Bradley Sills, an analyst from Bank of America Securities, reiterated a “Buy” rating on the company’s shares with the same price target of $440.00. Salesforce, Inc. (NYSE:CRM) is well-placed for a revenue growth acceleration to 12% – 13% YoY by H2 2026, says Sills. This growth is expected to be aided by an improved spending environment and the introduction of Agentforce.
SaaS adoption has been growing across industries because of its scalability, cost-efficiency, and accessibility. These increased demand trends for SaaS solutions align directly with Salesforce, Inc. (NYSE:CRM)’s offerings, mainly its Customer 360 platform and CRM software. Furthermore, a rise of AI and ML in SaaS products offers Salesforce, Inc. (NYSE:CRM) an avenue to strengthen its position via platforms such as Einstein AI.
The company’s established market position and vast customer base offer significant advantages as the broader CRM landscape evolves. Montaka Global Investments, an investment management company, released its Q4 2024 investor letter. Here is what the fund said:
“There are multiple structural trends in the enterprise software space, including (i) the ongoing cloud migrations and digital transformations of enterprises, and (ii) the infusion of AI into software applications.
While the former remains in its early innings (80-85% of enterprise workloads still reside ‘on-premise’ – many of which will ultimately move to public clouds), the latter remains in its infancy.
Given all the hype of late, it’s hard to fathom that large-scale deployments of AI-based enterprise applications have barely even started. It’s all still to come. And we believe 2025 will be the first year that we really start to see meaningful deployments and adoption of these kinds of applications.
Consider another of our top 10 holdings, Salesforce, for example. Its revenue growth is at a cyclical low. Indeed, at just +8% per annum, as reported in the company’s most recent quarter, its rate of revenue growth has never been lower.
But in 2025, not only will price increases that were announced two years ago boost Salesforce, Inc.’s (NYSE:CRM) revenue growth, but the year will also mark the early stages of adoption of the company’s new ‘Agentforce’ (released only weeks ago). This is a new platform that lets businesses build and deploy their own custom AI agents to automate tasks, improve efficiency, and enhance customer experiences…” (Click here to read the full text)
While we acknowledge the potential of CRM as an investment, our conviction lies in the belief that some deeply undervalued AI stocks hold greater promise for delivering higher returns, and doing so within a shorter timeframe. If you are looking for a deeply undervalued AI stock that is more promising than CRM but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.
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