Morgan Stanley Highlights Top U.S. Software Stocks with Strong Growth Potential

Morgan Stanley has spotlighted several high-potential U.S. software companies showing resilience amid industry challenges. Leading the list is Atlassian (TEAM), which the firm views as “an attractive setup” despite being down roughly 37% year-to-date. Analysts believe fears surrounding generative AI’s impact on Atlassian’s core business are exaggerated, emphasizing that the company’s strength lies in managing the broader software development lifecycle, not just developer productivity. With a discounted valuation (20x EV/CY26 FCF) and steady momentum, Morgan Stanley expects Atlassian to deliver over 20% top-line growth in its fiscal first quarter, surpassing consensus by 2–3%. The firm also anticipates Atlassian will raise its full-year guidance to 18.5–19% growth.

Atlassian recently acquired The Browser Company and announced plans to acquire DX, an engineering intelligence platform, for about $1 billion. Analyst sentiment remains positive, with Wells Fargo initiating coverage with an Overweight rating, while Bernstein and Mizuho reiterated Outperform ratings.

JFrog (FROG) is also expected to post another “beat and raise” quarter amid improved IT spending. Partner feedback indicates mid-20% growth and strong demand for its Artifactory, X-Ray, and Advanced Security products. Morgan Stanley projects sustained growth, with cloud services expanding over 40% year-over-year. The addition of former Morgan Stanley CIO Sigal Zarmi to JFrog’s board further boosts investor confidence.

DigitalOcean (DOCN) is gaining momentum after addressing refinancing concerns and expanding its AI/ML offerings. Morgan Stanley forecasts 15–16% growth in late 2025, with potential upside into 2026.

Lastly, Appian (APPN) continues to impress with robust SaaS growth driven by strong public sector demand and enhanced AI capabilities. Morgan Stanley predicts 20–21% cloud growth and 17% total revenue growth, outperforming market expectations.