Software stocks had a troubling end to the last year and some even continued to fall during January. After a solid year, profit-taking would have been acceptable. However, the continuous decline in January had investors worried, with some media personalities calling it the end of software stocks.
It didn’t take the market long to change its views though. In general, software stocks are not as negatively impacted by tariffs as hardware stocks. Since Trump took over, people have been evaluating their options and with tariffs on the horizon, found software to be a relatively safe sector.
There were some concerns on the AI front as well. The emergence of DeepSeek AI has meant that companies in the US may not be willing to spend more on their AI ventures. Similarly, businesses could simply use DeepSeek’s much cheaper technology, causing downward pressure on subscription prices for instance. So far, none of this looks like becoming a reality, so on the back of solid earnings, most software stocks have comfortably outperformed the market.
We decided to take a look at the top 15 stocks that are outperforming the market so far this year. To come up with our list of 15 software infrastructure stocks outperforming in 2025, we only considered stocks with a market cap of at least 2 billion that were outpacing the broader market till the end of last week.
15. DLocal Limited (NASDAQ:DLO)
DLocal Limited is a payment processing system provider that offers pay-in and pay-out solutions. The company sells its products to streaming, SaaS, travel, financial services, gaming and crypto, commerce, e-learning, ride-hailing, on-demand delivery, and advertising industries. The company’s stock is up over 9% this year. While it has almost doubled in the last few months, the stock is still down about 80% from its all-time highs hit in 2021.
There are two reasons why the stock is outperforming this year. For starters, the company is on a recovery path and the numbers are finally starting to show that recovery. Q3 revenues rose 13.3% YoY, comfortably beating analyst estimates. In the last two quarters, gross profit has also grown. Payment volumes grew a whopping 41% YoY on the strength of international operations including Latin America, South Africa, Egypt, and Mexico.
The second reason for the optimism is the potential of an acquisition. In December, Reuters claimed that the company had engaged JP Morgan for a potential sale to interested parties. This could be one way to unlock better valuation in the stock but the CEO last month clarified that the company is not up for sale. Even though the management has clarified matters this time, investors could still be betting for an eventual sale, or at least a resurfacing of the rumors and that’s what has helped the stock outperform the market this year.
14. MongoDB Inc. (NASDAQ:MDB)
MongoDB Inc. is a general-purpose database platform provider. It offers a range of products and services including MongoDB Enterprise Advanced, MongoDB Atlas, and MongoDB Community Server. The company also provides consulting and training services. The stock is up over 13.5% this year and analysts are optimistic it has much more to go.
Morgan Stanley picked the stock as a top pick in its 2025 generative AI outlook report. The investment bank believes that the cost of data and computing going down aligns well with the broadening capabilities and the increasing demand for software infrastructure. This is likely going to positively affect the earnings of the company in 2025.
Similarly, analysts at financial services firm Cantor have a price target of $344 on the stock, a 23.7% upside from current levels:
we could see a scenario where numbers improve off these changes, given the consumption nature of the business, would lead to torque to the upside and drive revenue growth to mid 20%
71% of MongoDB’s Q3 revenue came from its cloud offering called MongoDG Atlas. It looks like this business segment is still in an early growth stage and poised to power the company’s growth in the coming quarters.
13. Calix Inc. (NYSE:CALX)
Calix Inc. is a software and cloud systems, platforms, and services provider. It offers Calix Intelligent Access EDGE, Calix Revenue EDGE, and Calix Cloud platform. The company sells its products through resellers and its direct sales force. Calix is up over 21% this year, with much of that price appreciation coming on the back of solid earnings in late January.
The company was able to deliver a revenue close to the higher end of its guidance and with a 34% growth in RPOs, a metric considered a good indicator of future revenue, the market took a liking to the stock. The company relies on large customers for about one-third of its revenue, and it is these customers that are driving its growth.
Apart from the earnings momentum, CALX is continuously gaining market share and added 18 new customers by snatching them from competitors. This is a sign that the company is offering better solutions, which will continue to help it eat into other companies’ market share. Amid international expansion, the company’s gross margin also reached over 55% helping it improve its profitability.
12. F5 Inc. (NASDAQ:FFIV)
F5 Inc. is a multi-cloud application delivery and security solutions provider that provides networking, unified, app management, and security solutions. The company also offers training, maintenance, consulting, and other technical support services. It sells its products to service providers, public sector institutions, large enterprise businesses, and governments. The stock is up 22% so far this year, comfortably outperforming the broader market.
The company reported its fiscal first-quarter earnings last week and an 11% YoY revenue growth excited investors. While the services segment remained stable, software and systems segments registered healthy growth at the rate of 22% and 18% respectively.
The FFIV bullish thesis consists of two main components, both backed by the artificial intelligence demand. First, as companies scale their AI infrastructure, they will need to pass more and more data between the storage and computing components. FFIV’s BIG-IP platform does exactly this.
Moreover, the company’s API protection technology is also crucial in securing the increasing usage of APIs. We believe these two technologies position the company perfectly to gain from AI going mainstream, driving its bullish thesis.
11. PagSeguro Digital Ltd (NYSE:PAGS)
PagSeguro Digital Ltd is a payment and financial solutions provider to micro-merchants, consumers, small and medium-sized companies, and individual entrepreneurs. The company offers cards, credit products, and digital banking solutions. It also provides investment services, research services, and insurance services.
The company’s stock is down 42% in a year. But there is reason to believe it bottomed out late last year and is well on its way to recovery, as shown by a 16% YTD performance. It increased its total payment volumes by 37% resulting in a bottomline improvement of 30%. This is a considerable improvement considering transaction volumes drive 55% of their total revenue.
After completing a $250 million buyback in 2024, the company continued with its shareholder-friendly approach announcing another $200 million worth of buybacks. This may be beneficial for shareholders but analysts are warning about other headwinds. Citi Research for instance downgraded the stock from Buy to Neutral last month. Citi analysts believe the rising interest rates in the country are going to cause significant headwinds for fintech companies. BofA analysts had a similar view in December, citing slower GDP in addition to the rising interest rates, which the bank sees staying at elevated levels for longer than anticipated.
10. Crowdstrike Holdings Inc. (NASDAQ:CRWD)
Crowdstrike Holdings Inc. engages in the provision of cybersecurity solutions. Its integrated system provides data, cloud workloads, cloud-delivered protection of endpoints, and identity. The company offers a range of services including IT operations management, data protection, securing generative AI workload, endpoint and cloud workload security, and other services. When Crowdstrike systems were involved in a global IT outage in mid-2024, the stock was at all-time highs. Few would have thought that 7 months on, the stock would regain the same levels. But here we are, with the stock up 21% for the year and trading at all-time highs.
The relatively quick recovery proves that Crowdstrike is still the go-to vendor in its niche. Its superior product quality and high switching cost in the industry mean retaining customers isn’t a big issue. The company’s Falcon platform, which is now powered by AI, is improving with each passing day as it analyzes over 2 trillion events on a daily basis. The quality of learning from processing these events means its models are likely going to stay superior going forward. This learning also helps in countering zero-day cyberattacks: attacks that are a result of unknown vulnerabilities in hardware or software.
Finally, a subscription-based business model with 95% of the revenues coming from predictable recurring subscriptions means the financials of the company, much like its AI models, get stronger with each passing day.
9. Samsara Inc. (NYSE:IOT)
Samsara Inc. designs and implements solutions that connect data from physical operations to its cloud platform. The company’s applications include vehicle telematics, mobile apps and workflows, and video-based safety. The company serves various industries including healthcare & education, food & beverage, transportation, construction, and other industries.
Samsara is another business benefiting from a subscription-based business model. The company’s Q3 results showed a 36% revenue surge in Q3, showcasing how its IoT solutions are helping it expand its customer base. The stock is up 24% for the year on the back of this impressive growth. However, there are concerns about its valuation. A 36% growth rate isn’t easy to sustain. The company’s own guidance points to a 22% – 23% YoY growth.
Irrespective of whether the company can deliver on these promises, volatility is likely going to stay. The stock still hasn’t reached the heights it was at just two months ago in December. It may be one of the best performers year to date, but the December dip has a big part to play in that outperformance. Investors would like to proceed with caution on this stock due to its valuation risk.
8. Okta Inc. (NASDAQ:OKTA)
Okta Inc. provides identity solutions to businesses. The company offers a portfolio of products and services including Single Sign-On, API Access Management, Access Gateway, Adaptive Multi-Factor Authentication, and Okta Device Access. OKTA sells its products through channel partners and sales force. The company’s stock is up 23% this year.
Okta may be a relatively smaller player but its growth rate has impressed many in the industry. In the last 8 years, the company has grown revenue at an average rate of 40%. This is better than its peers like Cisco, Palo Alto Networks, and Fortinet. But what’s driving the recent surge in price?
Okta is focusing on acquiring high-quality large customers. Its products are quickly becoming a top priority for companies looking to secure their systems as security continues to remain a top priority for many companies, second only perhaps to generative AI.
The company finally turned profitable in late 2024 which is one reason why the stock started to tick upwards after a volatile year. This upward momentum is likely to continue as the company cements its position in the industry in 2025.
7. Nebius Group N.V. (NASDAQ:NBIS)
Nebius Group N.V. is a technology company that builds full-stack infrastructure to facilitate the AI industry. The company’s business includes Toloka AI, Nebius, Avride, and TripleTen. The stock is up 37% YTD and much of that has to do with developments related to AI and DeepSeek.
Nebius isn’t profitable yet but could be by the start of next year. It has no debt, nearly $3 billion in cash, and operates in an industry that is seeing a huge demand. This is exactly the time when institutional investors start looking into companies. One of its investors is the GPU giant Nvidia so the company is clearly on the radar of many investors.
Just a couple of months ago, Citron Research had great words for the company’s CEO Arkady Volozh, calling him ‘the real deal’:
A sleeper with no analyst coverage yet, the market hasn’t caught on to its massive potential—or its undervaluation vs. CoreWeave.
When this report was revealed, the stock was already up 35%. Since then, it has become an extremely volatile share as more people notice the company and start looking into it. Despite the volatility, shares continue to trade 37% higher since the start of this year.
6. GitLab Inc. (NASDAQ:GTLB)
GitLab Inc. is a software developer for the software development lifecycle that provides GitLab, a DevOps platform; and related professional & training services. It helps businesses to design, build, secure, and implement software to enhance productivity. The stock is up 25% this year.
GitLab offers a unique AI play. It is essentially a platform that provides a collaborative environment for developers. It offers three payment plans, with the first of them being the free version. Since the emergence of AI, the company has started offering AI features that help coders improve their performance, and that of their code. Its highest-priced tier, GitLab Ultimate, has gained so much traction thanks to its AI offerings that it now accounts for over 50% of the company’s annual recurring revenue.
It’s not just the AI features that are driving the growth though. The company also ticks another important box for developers: security. By allowing users to create self-hosted models, the company gives them the unique ability of not having to take their data out of their organization. This helps reduce security breaches and is also what attracts customers like the US government to use GitLab.
Last but not least, the transparency and privacy offered by GitLab provide the icing on the cake. The unique moat that this company enjoys should help it cater to most of the $40 billion TAM it commands. The stock is relatively flat for the year despite the outperformance since January, which would suggest there is still ample time for investors to get in while the rally is beginning to shape up.
5. DigitalOcean Holdings Inc. (NYSE:DOCN)
DigitalOcean Holdings Inc. is a cloud computing platform that offers on-demand infrastructure and platform tools for growing & small online businesses, start-ups, and developers. The company also offers platform-as-a-service (PaaS), infrastructure-as-a-service (IaaS), and software-as-a-service (SaaS) solutions. The stock is up 31% so far this year.
DOCN provides affordable cloud computing services to small and medium enterprises. This is a growing market and one that the company intends to dominate. AMD’s acquisition of Vultr, which operates a similar business, is proof that this TAM is big enough. It also validates the company’s business model.
Even though the company’s growth has slowed down, it still outpaces the broader cloud-computing industry by a long margin. DOCN overhauled its leadership in the last two years and switched from a finance-focused executive team to a technology-focused team. This team may be inexperienced but so far is delivering well. Here’s what Citi analyst Mark Zhang had to say about the company:
DOCN gradually re-building credibility may take time, but multiple identifiable levers to re-accelerate organic growth (lucratively re-engage and upsell the base, lower-end hyperscaler logo wins, ramping top-of-funnel efforts) underwrite our conviction on consistent topline and profitability upside going forward.
The stock lost 23% in value in a matter of three months but the current rally has recovered all the losses. In hindsight, it was a good opportunity to buy this strong stock and that opportunity is still out there for the taking.
4. Cloudflare, Inc. (NYSE:NET)
Cloudflare, Inc. is a cloud services company that provides a variety of services to businesses. It offers an integrated cloud-based security solution and website & application security products. The stock is up 54% this year and it has a lot to do with the company’s recent quarterly performance.
NET is a high-quality company and while such companies tend to give better returns, they are almost never available at a cheap valuation. The company registered another quarter with sequential growth but the bigger question for investors is how long can the company maintain a 30%+ growth rate.
Many analysts are bullish on the company’s stock. JMP Securities upped its price target from $135 to $180 while Morgan Stanley boosted its target from $140 to $154. Needham’s $185 price target confirms the broader trend of bullishness but investors may need to keep one thing in mind. As strong as the company is, it has a rather fragile balance sheet. This means that if something goes wrong, it will have less room to maneuver. But for now, everyone is attaching a premium to the company’s valuation despite these risks.
3. Twilio Inc. (NYSE:TWLO)
Twilio Inc. is a customer engagement platform solutions provider that operates in the Twilio and Twilio Communications segments. It offers different software solutions and application programming interfaces for interactions between end users and customers. The stock’s 35% YTD returns have excited many investors after a dull first 9 months period for the company in 2024. The stock has more than doubled in a year.
Twilio’s resurgence is possibly due to it being on the cusp of an inflection point. Apart from an improving business, the company’s financial strength is also going up. It took some cost-reduction measures as well as efficiency improvements, both of which are contributing to its improving free cash flow.
The topline acceleration that the company now expects is set to finally make the company profitable on an operating income level in fiscal 2025. Once that happens, the business will have developed much more if it continues at the current pace. This inflection point has the potential to re-rate the stock, bringing incredible returns for investors.
2. BlackBerry Limited (NYSE:BB)
BlackBerry Limited is an intelligent security services and software provider to governments and enterprises. It operates in IoT (internet of things), cybersecurity, and licensing & other segments. The company provides CylanceGUARD, CylanceINTELLIGENCE™, CylanceEDGE, BlackBerry Messenger (BBM) Enterprise, BlackBerry SecuSUITE, CylanceENDPOINT, and other solutions. The company’s stock is up 39% so far this year and its 1-year returns are closing in on 100%.
Blackberry’s turnaround story has underwhelmed and were it not for its strange involvement in a meme-stock rally last year, its returns would have been muted. But the recent optimism points to the possibility of improving fundamentals and we look at why that’s the case.
BlackBerry in December finally got rid of Cyclane, a division that was a drag on its business. It sold it at a fraction of the original acquisition cost but the company can now focus on other parts of the business. This news was well-received by investors as well and the stock has been on an uptick since.
The company’s recent partnership with Microsoft also inspires confidence. As software-defined vehicles become the norm, Blackberry’s technology becomes more and more relevant, though arguably the competition also rises. The company’s QNX system which is already used in many vehicles could soon be available on Microsoft Azure after this partnership.
1. Palantir Technologies Inc. (NASDAQ:PLTR)
Palantir Technologies Inc. is a software platforms builder and deployer for the intelligence community. The company provides Palantir Foundry, Palantir Gotham, Palantir Apollo, and Palantir Artificial Intelligence Platform (AIP). The stock, which was the best S&P 500 performer in 2024, is already up 46% so far this year!
As one of the most important AI companies out there today, it was the recent earnings report that is driving the YTD returns for PLTR investors. The commercial revenue grew 54% YoY while government revenue was up 45%. The stock shot up nearly 25% after the earnings report.
Palantir provides rapid and scalable deployment of AI into existing workflows which is what makes its business scalable to different industries. For instance, in the last quarter, the company signed a $67 million deal with a major pharmacy in the US and a $40 million deal with a telecom company. The improvements in productivity and the resulting cost efficiencies mean firms don’t hesitate to spend money on Palantir’s offerings.
With a 31% growth guided by the company’s management for 2025, the share price is likely to keep going up, especially on better-than-expected quarterly reports throughout the year.
Palantir is not on our latest list of the 30 Most Popular Stocks Among Hedge Funds. As per our database, 43 hedge fund portfolios held PLTR at the end of the third quarter which was 44 in the previous quarter. While we acknowledge the potential of PLTR as a leading AI investment, our conviction lies in the belief that some AI stocks hold greater promise for delivering higher returns, and doing so within a shorter timeframe. If you are looking for an AI stock that is as promising as PLTR but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.
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Disclosure: None. This article was originally published at Insider Monkey.
