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Software Stocks Rebound Amid AI Optimism

Shares of customer service software firms RingCentral and Five9 soared Friday after both companies reported stronger-than-expected fourth-quarter results, easing investor concerns about artificial intelligence disrupting traditional software-as-a-service business models. RingCentral jumped 34%, while Five9 gained approximately 12%, reversing some of the steep losses seen in the sector earlier this year.

The broader software market has been under pressure, with the iShares Expanded Tech-Software Sector ETF down about 23% so far in 2026. High-profile companies such as Atlassian, Unity Software, and Rapid7 have lost more than half their market value, while giants like Salesforce and Microsoft have fallen 30% and 18%, respectively. Analysts attribute much of the decline to fears that new AI tools, capable of rapidly generating apps, websites, and workflows, could render traditional SaaS offerings less essential.

AI Adoption Drives Revenue Growth

Both RingCentral and Five9 highlighted artificial intelligence as a key growth driver. RingCentral reported that annual recurring revenue from customers leveraging AI tools doubled year-over-year, reaching nearly 10% of its total ARR. The company has also integrated ChatGPT models into its voice AI platform, allowing clients to automate customer interactions more efficiently.

Five9 similarly noted strong adoption of its enterprise AI solutions, with bookings more than doubling compared to last year and its AI portfolio reaching $100 million in annual recurring revenue. Chairman Michael Burkland emphasized during the earnings call that while AI and large language models enhance customer service capabilities, they do not replace the core operations of a human-run support organization. “You cannot run a customer service organization on an LLM alone,” Burkland said, underscoring the company’s continued competitive edge.

Investor Sentiment and Market Implications

The earnings reports come after a challenging period for software stocks, driven by concerns over AI disruption. Recent developments from AI innovators such as OpenAI and Anthropic sparked fears that traditional SaaS revenue streams could erode, prompting steep selloffs across the sector.

RingCentral and Five9’s positive guidance suggests that AI is acting as a tailwind rather than a threat, helping to boost customer adoption, expand service offerings, and enhance backlogs. Market watchers note that the rebound in these names may signal broader stabilization for other software firms navigating the integration of AI into enterprise solutions.

Looking Ahead

Management teams at both companies indicated that AI will continue to be central to their strategies, with ongoing investments in machine learning and automation tools. Analysts say these developments could help the companies capture a larger share of the growing market for AI-enhanced customer engagement, particularly as businesses seek faster, more efficient solutions without sacrificing service quality.

For investors, the performance of RingCentral and Five9 offers a potential blueprint for navigating the sector: embracing AI as a complement to existing SaaS offerings, rather than viewing it solely as a threat to traditional revenue models.