In Q1 2026, the rapid expansion of artificial intelligence has led to significant declines in software stocks, with Microsoft (MSFT) down approximately 35% from its all-time highs as investors express concerns over costly AI-related investments. Adobe (ADBE) is also facing scrutiny, trading at its lowest forward earnings multiples in over a decade amid worries about AI disruptions in their business models.
Despite the selloff, both companies show promise. Microsoft reported a robust 29% increase in Intelligent Cloud revenue, totaling $32.9 billion, and expects FY26 revenue growth of 16%, reaching $374 billion. Adobe, which saw a 13% increase in Q1 FY26 subscription revenue, projects a 10% revenue increase in FY26. Both companies’ valuations are nearing historic lows, enticing long-term investors.
