These 3 Software Stocks Could Deliver Outsized Returns This Year

Some of the best returns in the stock market have come from software stocks. These tech companies can scale to serve more customers while enjoying annual recurring revenue models. Not only do new customers enter subscription plans, but existing customers may have to upgrade to more expensive plans as their needs change. While some software stocks are better positioned than others, these three picks seem ready to produce outsized returns for patient investors. 

Microsoft

Microsoft (NASDAQ:MSFT | MSFT Price Prediction) powers many software products with its Azure cloud platform. Cloud computing has been a major catalyst for Microsoft in recent years, and it made up more than 60% of total revenue. Cloud revenue increased by 26% year-over-year, while Microsoft’s overall revenue jumped by 18% year-over-year in Q1 FY26.

The tech giant also generates revenue from software products like Microsoft 365, Xbox, and LinkedIn. However, the company’s AI investments remain the largest long-term opportunity that can help it outperform the stock market. Microsoft’s Copilot is accelerating the adoption of Microsoft Office, and its cloud platform serves as the digital infrastructure for many AI apps.

Microsoft stock has more than doubled over the past five years, and a recent correction may present a buying opportunity for patient investors. 

ServiceNow

ServiceNow (NYSE:NOW) helps businesses create AI workflows and agentic AI for customer support. The stock is down by almost 40% over the past year, but that poor performance doesn’t align with ServiceNow’s strong financial growth.

The company delivered 22% year-over-year revenue growth in Q3 2025 while exceeding all topline growth and profitability metrics. It’s always a good sign when a company beats guidance, and ServiceNow’s annual recurring revenue model implies that additional wins are on the way. 

More than 8,400 customers use ServiceNow, and that includes more than 85% of the Fortune 500 companies. These enterprise clients have deep budgets and regularly spend more money as their needs change. ServiceNow also boasts a 97% renewal rate across these customers. 

Rezolve AI

Rezolve AI (NASDAQ:RZLV) is an agentic commerce platform that looks like a hidden gem for long-term investors. It’s up by more than 60% to start the year, and a major update to its annual recurring revenue projections is one of the main reasons.

The company told investors that it expects to exit 2026 with at least $500 million in annual recurring revenue. That’s more than double Rezolve AI’s $209 million in annual recurring revenue that it had at the end of 2025. Rezolve AI also told investors it has experienced a significant boost in demand from institutional investors amid soaring annual recurring revenue.

Rezolve AI is the smallest company on this list with a market cap just shy of $2 billion. The small market cap suggests that the stock can produce meaningful returns as more investors notice its growth rates. Rezolve AI works with major global brands, which positions it for elevated recurring revenue as those companies’ needs evolve.