Citi names non-Mag 7 software stocks worth buying amidst rout

US software stocks have been caught in a violent downdraft since the start of 2026, with the iShares Expanded Tech-Software Sector ETF (ticker symbol IGV) crashing more than 20% year-to-date.

Investors are worried that generative artificial intelligence (AI) agents – like Anthropic’s recently expanded Claude Cowork – will dismantle the traditional Software-as-a-Service (SaaS) economic engine.

Still, Citi’s senior analyst Drew Pettit suggests this panic has created a rare “de-risked” entry point, adding that fundamental strength will eventually trump the current AI-phobia atmosphere.

After filtering for companies with falling share prices whose earnings estimates rose, he believes the following three are particularly well-positioned to recover as the year unfolds.

AppLovin Corp (NASDAQ: APP)

Citi maintains a “buy” rating on AppLovin stock with a price target of “$710”, indicating its analyst remains steadfast on the ad-tech firm’s structural advantages.

Despite an industry-wide sell-off, its AXON 2.0 artificial intelligence engine has proven a resilient “flywheel” for growth – consistently driving higher returns for mobile advertisers.

In a recent note to clients, Pettit recommended investing in APP shares as the company’s earnings estimates are improving even as its terminal multiple contracts.

All in all, Citi sees AppLovin as a high-margin AI leader that’s actually delivering on the bottom line.

APP’s chief executive, Adam Foroughi, also downplayed artificial intelligence disruption fears on the recent earnings call, saying “there’s a real disconnect between market sentiment and the reality of our business.”

ServiceNow (NYSE: NOW)

Citi maintains ServiceNow stock as a “top conviction pick” with a price objective of “$1,253”.

While this software name has been caught up in AI disruption fears, Drew Pettit believes its “Now Assist” artificial intelligence integration will become a key catalyst for earnings momentum.

Despite recent noise, NOW shares remain exceptionally well-positioned to “still deliver near-term,” he told clients in a research report.  

ServiceNow’s focus on fundamental momentum has sufficiently de-risked it from an “exit multiple perspective”, making it a prime candidate for a rebound once traders return to growth names.  

The recently authorized $5.0 billion stock buyback programme makes NOW even more attractive as a long-term holding in 2026.

Autodesk Inc (NASDAQ: ADSK)

Citi maintains a “buy” rating on Autodesk stock as well and has recently raised its price target to “382”, indicating potential upside of about 65% from current levels.

Despite its share price crashing in terms of year to date, the company’s internal metrics paint a rosier picture for what lies ahead for ADSK, the investment argued in its report.

Autodesk has recently raised its fiscal 2026 guidance, citing a new direct billing model and steady AI adoption in its Architecture, Engineering, and Construction (AEC) segment.

According to Drew Pettit, this will soon start to lure investors back to ADSK, whose 14-day relative strength index (RSI) sits at 33 currently, indicating bearish momentum is approaching exhaustion.