Software Companies Ramp Up Buybacks Amid AI Disruption Fears

Investors remain skeptical that buybacks can offset concerns about AI's impact on the software sector

Mar. 3, 2026 at 5:39am

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U.S. software companies have significantly increased their stock buyback plans in recent months as their shares have plunged amid fears that advancements in artificial intelligence (AI) will disrupt the competitive landscape for the sector. However, investors and strategists are doubtful that these buybacks will be enough to stem the selling pressure, as they believe the long-term fundamental outlook for many software firms remains uncertain in the face of AI's rapid evolution.

Why it matters

The software sector has been hit hard by investor concerns over the potential disruptive impact of AI, with the S&P 500 software index down 28% since late October. Companies are turning to buybacks in an attempt to prop up their stock prices, but experts argue that buybacks alone are unlikely to be a sufficient solution without clear evidence that AI won't fundamentally hurt the business prospects of specific software firms.

The details

Since January 12, U.S.-listed software companies have authorized $70.5 billion in stock repurchases, nearly four times the value of announcements for the same period a year ago. Major firms like Salesforce and ServiceNow have significantly boosted their buyback programs. However, investors remain unconvinced that these buybacks can serve as a catalyst for the software sector as a whole, arguing that companies need to demonstrate their resilience to AI disruption over multiple quarters before their stocks are likely to recover.

  • Since January 12, U.S.-listed software companies have authorized $70.5 billion in stock repurchases.
  • The S&P 500 software index is down 28% since late October.

The players

Anthropic

An AI company whose recent product announcements raised concerns about the rapid changes in AI and the difficulty of evaluating software companies' business prospects.

Salesforce

A software company that announced a $30 billion increase to its existing share repurchase program.

ServiceNow

A software company that authorized an additional $5 billion in buybacks on top of the $1.4 billion remaining in its existing share repurchase plan, including plans for a $2 billion accelerated buyback.

Paychex

A human resources software and services company that backed its annual financial guidance in December and then announced a $1 billion buyback program on January 16, replacing a 2024 plan that called for $400 million in repurchases.

Andrew Slimmon

A senior portfolio manager at Morgan Stanley Investment Management who prefers companies that repurchase shares when they have strong fundamentals and price momentum.

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What they’re saying

“When a company announces a ⁠buyback after their stock has been hit hard, I think that is an attempt to stop the decline.”

— Andrew Slimmon, Senior Portfolio Manager

“I don't think the buybacks are enough. There needs to be demonstrated evidence that AI isn't going to fundamentally hurt the business of a specific software company. That just takes time.”

— Peter Tuz, President

“Buybacks would likely ⁠not boost the performance of software stocks as investors ‌will focus more on the long-term fundamental outlook.”

— Daniel Morgan, Portfolio Manager

The takeaway

The software sector's heavy reliance on buybacks to prop up their stock prices highlights the deep uncertainty surrounding the long-term impact of AI on their business models. Investors will need to see clear evidence that individual software companies can adapt and thrive in the face of AI disruption before they are likely to regain confidence in the sector as a whole.