Bank of America’s Top 5 Software Stock Picks for Second Half 2026: Snowflake, Datadog Lead the Pack

Key Takeaways

• BofA analyst Koji Ikeda identifies Snowflake, Datadog, JFrog, MongoDB, and Twilio as premier software investments for the second half of 2026
• These five stocks have collectively gained 30% year-to-date, contrasting sharply with the software ETF’s 12% decline
• Each company exceeded earnings forecasts, delivering an impressive average post-earnings surge of 36%
• Artificial intelligence adoption serves as the primary catalyst driving expansion across all five firms
• Conservative forward guidance from management teams positions these stocks for potential upside surprises

Koji Ikeda, a Bank of America analyst covering the software sector, has spotlighted five infrastructure software companies poised for continued strength through the remainder of 2026. This select group, referred to as the “Fab Five,” has dramatically outperformed the wider software industry year-to-date.

The iShares Expanded Tech-Software Sector ETF has declined 12% in 2026, yet these five stocks have rallied an average of 30%. Ikeda has reaffirmed Buy ratings across the entire cohort.

According to the bank’s analysis, robust quarterly results, measured forward projections, and accelerating AI integration represent the primary factors supporting these equities entering the year’s second half.

Breaking Down BofA’s Top Five Software Picks

Snowflake

Snowflake stock rocketed over 35% in a single trading session following its most recent quarterly report. The company’s product revenue expanded 34% compared to the same period last year, representing an acceleration from the previous quarter’s 30% growth rate.

Snowflake Inc., SNOW

Bank of America highlights that Snowflake’s AI product portfolio, featuring Cortex AI and Cortex Code solutions, is gaining significant traction within enterprise technology stacks. Should AI adoption rates exceed current projections, the stock could experience additional appreciation.

Datadog

Datadog emerged as the group’s top performer, soaring nearly 70% following its earnings announcement. The company reported revenue growth acceleration to 32% year-over-year, with AI-linked business now representing over 10% of total revenue while expanding at a rate exceeding 100% annually.

BofA analysts view the observability market segment as particularly compelling within the software landscape, with Datadog strategically positioned to capture sustained demand over the long term.

JFrog

JFrog shares jumped 43% after the company released quarterly results. Cloud revenue growth reached 50%, accelerating from the previous quarter’s 42% expansion rate.

The company occupies a strategic position as a comprehensive risk management solution in software development, spanning the entire supply chain from binary repository management through security oversight. BofA suggests that either a major enterprise contract win or a high-visibility software supply chain security incident could serve as a positive catalyst.

Twilio

Twilio experienced a nearly 50% share price increase after delivering results that surpassed analyst expectations. The company’s gross profit dollar growth improved significantly to 16% from the prior quarter’s 10% rate.

Bank of America positions Twilio as critical infrastructure enabling business and AI agent communications spanning voice and messaging platforms. The bank identifies new voice AI contract wins and continued margin expansion as key catalysts to monitor.

MongoDB

MongoDB registered the most modest post-earnings movement among the five, gaining just 4.5%. The company’s Atlas revenue growth ticked upward to 29.4%.

BofA’s thesis suggests MongoDB’s most significant AI-related growth opportunity remains on the horizon, linked to widespread deployment of consumer-facing enterprise AI applications. The bank believes this catalyst may materialize earlier than current market consensus anticipates.

Critical Factors for the Second Half of 2026

Bank of America notes that all five management teams provided cautious forward guidance despite delivering strong quarterly performance, creating potential for positive guidance revisions as the year progresses.

The bank anticipates investors will closely track whether AI demand maintains its trajectory and whether enterprise deployment of emerging AI technologies can sustain the group’s elevated growth rates.

Currently, BofA regards these Fab Five companies as among the most favorably positioned software investments heading into the year’s second half.