AI Is Splitting Software Stocks as CrowdStrike and Palantir Show Different Paths to Growth

AI Creates a New Divide Across Enterprise Software

The debate surrounding software stocks has shifted from whether artificial intelligence will disrupt the industry to which companies can turn that disruption into measurable growth. Recent earnings from CrowdStrike (CRWD), Palantir Technologies (PLTR), Salesforce (CRM), Intuit (INTU), Palo Alto Networks (PANW) and Datadog (DDOG) show increasingly different outcomes.

Cybersecurity has emerged as one area where AI is adding new security requirements rather than simply replacing existing software. CrowdStrike's latest quarter produced record net new annual recurring revenue, while Palo Alto Networks said AI developments are elevating cybersecurity on CIO priority lists. Palantir, meanwhile, is seeing rapid growth from enterprise and government demand for its AI software, while Salesforce is working to integrate agents directly into its existing platform.

Key Points

• CrowdStrike reported 26% revenue growth and record net new ARR of $333 million, while raising its fiscal 2027 net new ARR growth outlook as AI increases demand for cybersecurity.
• Palantir reported 93% Q2 revenue growth and 149% U.S. commercial growth, demonstrating a different AI software model built around rapidly expanding enterprise adoption.
• Salesforce's Agentforce ARR exceeded $1.5 billion, up more than 240%, while cybersecurity peers Palo Alto Networks and Datadog also reported strong demand connected to AI deployments.

CrowdStrike Shows How AI Can Expand Software Demand

One of the central concerns surrounding enterprise software is that AI agents could reduce the number of human users required to perform business tasks. That creates questions for software companies whose economics have traditionally depended on user-based subscriptions.

Cybersecurity presents a different dynamic. More AI systems and autonomous agents can create additional infrastructure that enterprises need to secure.

CrowdStrike's latest financial results provide evidence of that demand. Fiscal second-quarter revenue increased 26% year over year to $1.47 billion, including 27% growth in subscription revenue to $1.40 billion. Ending ARR reached $5.84 billion.

More importantly for the company's growth trajectory, net new ARR reached a record $333 million, increasing 51% year over year. CrowdStrike subsequently raised its fiscal 2027 net new ARR growth guidance by 630 basis points to approximately 34% at the midpoint.

Falcon Flex, which allows customers to adopt additional capabilities across CrowdStrike's platform, also continued expanding. Ending ARR from accounts using Falcon Flex exceeded $2.29 billion, up 101% year over year.

The growth has been accompanied by cash generation. CrowdStrike produced $530 million in operating cash flow and a record $377 million in second-quarter free cash flow, representing a 26% free cash flow margin. Non-GAAP operating margin was 25%.

The acceleration did not begin with a single quarter. CrowdStrike had already reported record fiscal first-quarter net new ARR of $256 million, up 32% year over year, before the measure accelerated to 51% growth in Q2.

The results help explain why cybersecurity has occupied a different position in the AI software debate. CrowdStrike's platform spans endpoint protection, cloud security, identity, data protection, observability, security operations and cybersecurity generative AI. As enterprises deploy additional AI infrastructure, CrowdStrike is positioning those workloads as another environment requiring security.

Palo Alto Networks is reporting a similar demand signal. The company said its fiscal fourth quarter added nearly $1 billion of net new Next-Generation Security ARR, with strength across Network & AI Security, Cortex and Idira. Management said advances in AI are elevating cybersecurity on CIO priority lists.

The security risks are also expanding. Palo Alto Networks said frontier AI models recently helped uncover more than 14,000 previously unknown vulnerabilities in open-source software, highlighting how AI can potentially shorten the time required to identify and exploit security weaknesses.

Why Is Palantir Different From Traditional Software?

Palantir represents another side of the AI software story.

Rather than primarily defending AI infrastructure, Palantir is selling software designed to integrate data, AI models and operational decision-making. Its recent growth rates show substantial demand for those capabilities.

Second-quarter revenue increased 93% year over year to $1.94 billion. U.S. revenue grew 115% to $1.57 billion, while U.S. commercial revenue increased 149% to $764 million. U.S. government revenue grew 90% to $809 million.

Contract activity was also substantial. Palantir closed 220 deals worth at least $1 million during Q2, including 98 worth at least $5 million and 73 worth at least $10 million. U.S. commercial total contract value reached a quarterly record of $2.13 billion, increasing 153% year over year.

The company generated $1.22 billion of adjusted free cash flow, representing a 63% margin, while adjusted operating income reached $1.19 billion with a 62% margin. Following the quarter, Palantir raised its full-year revenue growth outlook to 82% and its U.S. commercial growth outlook to 134%.

Those operating results have been accompanied by considerable stock-market expectations.

Palantir entered September after gaining 51% during August, according to the provided market data. The stock then fell 6.6% during the September 2 session as a broader software selloff developed alongside rising bond yields and elevated oil prices.

Valuation amplified the sensitivity. Palantir was trading at 87.59 times forward earnings as of September 1, according to the provided data, compared with 19.43 for the S&P 500 and 21.96 for the Nasdaq Composite.

That creates an important distinction in the current stock market update: strong AI-related business growth does not eliminate price-action risk when expectations embedded in a stock are already high.

Palantir is continuing to expand enterprise distribution. The company and PwC US recently broadened their strategic alliance around enterprise AI deployments, M&A transformation and ERP modernization. The companies said an AI-native deals IT platform built using Palantir Foundry and AIP is designed to execute deals as much as 50% faster and reduce one-time transaction costs by as much as 45%, according to the provided material.

Which Other Software Companies Are Turning AI Into Growth?

The emerging divide extends beyond CrowdStrike and Palantir.

Datadog reported second-quarter revenue growth of 36% to $1.12 billion. Customers generating at least $100,000 in ARR increased to approximately 4,720 from about 3,850 one year earlier. The company generated $279 million in free cash flow.

Datadog has also expanded its platform for AI workloads, launching AI-powered Bits Code, Bits Chat and Bits Agent Builder. Management said customers are using the platform to observe, secure and operate AI-enabled applications.

Salesforce presents a different model because it must integrate AI into a large established software business.

Agentforce ARR exceeded $1.5 billion in its fiscal second quarter, increasing more than 240% year over year. Combined Agentforce and Data 360 ARR approached $3.9 billion, up more than 210%. Salesforce also reported 7 billion Agentic Work Units delivered to date across Agentforce and Slack, including 3.2 billion during Q2.

The numbers provide measurable evidence that customers are using Salesforce's agentic products. Bookings from Agentforce One Edition and Agentforce for Apps more than doubled sequentially during the quarter, while Slack recorded its fastest quarterly net new annual order value growth since Salesforce acquired it.

The contrast with Intuit illustrates why investors are increasingly evaluating software companies individually rather than treating AI as a uniform sector catalyst.

Intuit's fiscal 2026 revenue increased 14% to $21.4 billion, but its fiscal 2027 guidance calls for total revenue growth of 9%–10%. TurboTax revenue is projected to increase 2%–3%, while Mailchimp is expected to range from a 1% decline to flat growth.

At the same time, Intuit continues to generate growth elsewhere in the portfolio. Global Business Solutions revenue increased 16% in fiscal 2026, while Online Ecosystem revenue grew 19%. The company said its strategic "Big Bets" collectively grew 34% and represented 30% of full-year revenue.

The comparison therefore is not simply between companies benefiting from AI and companies being displaced by it. Recent financial results show a spectrum ranging from accelerating AI-linked demand to businesses adapting existing products and economics around a changing software environment.

What It Means for Investors

Recent company news suggests the AI impact on software is becoming more measurable, but also more uneven.

CrowdStrike provides one of the clearest examples of AI contributing to demand for an existing software category. Revenue grew 26%, net new ARR accelerated 51%, and management materially increased its full-year net new ARR growth outlook. Palo Alto Networks is seeing a related cybersecurity trend, while Datadog reported 36% growth as customers increasingly deploy AI-enabled infrastructure.

Palantir represents a second model: software being deployed directly as part of enterprise AI adoption. Its 93% overall revenue growth and 149% U.S. commercial growth indicate that AI-related enterprise spending is already translating into substantial financial growth for the company.

Salesforce represents a third test. Agentforce's more than 240% ARR growth shows rapid adoption, but its $1.5 billion ARR remains one component of a much larger enterprise software business. The question is therefore whether new AI products can become large enough to change the growth profile of the broader company.

Stock valuation remains a separate consideration from operating performance. The provided market data showed Palantir trading at 87.59 times forward earnings before its September pullback, while CrowdStrike was trading at 146 times projected next-year earnings following its post-earnings rally.

That helps explain why software stocks can report strong operating trends while remaining sensitive to interest rates, market sentiment and changing expectations. The AI debate is increasingly being decided through revenue growth, recurring revenue, customer expansion, margins and cash generation rather than through AI announcements alone.

Conclusion

AI is not producing one outcome across the software sector.

CrowdStrike and Palo Alto Networks are seeing AI expand cybersecurity requirements. Palantir is experiencing rapid enterprise and government demand for AI software. Datadog is benefiting as companies need to observe and secure increasingly complex AI-enabled infrastructure. Salesforce is integrating agents into its established enterprise platform. Intuit, meanwhile, is entering fiscal 2027 with slower overall revenue growth guidance despite continued growth across several businesses.

For the stock market, that divergence is becoming an important signal. The question is moving beyond whether AI will disrupt software toward which companies can demonstrate that AI is expanding customer spending, recurring revenue and cash generation.

FAQs

Why is AI benefiting cybersecurity companies such as CrowdStrike?

AI deployments create additional systems, workloads and autonomous agents that enterprises need to secure. CrowdStrike reported 26% Q2 revenue growth and record net new ARR of $333 million, up 51% year over year, while raising its fiscal 2027 net new ARR growth outlook.

How fast is Palantir growing?

Palantir reported second-quarter revenue growth of 93% year over year to $1.94 billion. U.S. commercial revenue increased 149% to $764 million, while U.S. government revenue grew 90% to $809 million.

Is Salesforce generating revenue from its AI products?

Salesforce reported that Agentforce ARR exceeded $1.5 billion in fiscal Q2, increasing more than 240% year over year. Combined Agentforce and Data 360 ARR reached nearly $3.9 billion, up more than 210%.

How is Datadog benefiting from AI?

Datadog reported Q2 revenue growth of 36% to $1.12 billion and said customers are using its platform to observe, secure and operate AI-enabled applications. The company has also introduced AI products including Bits Code, Bits Chat and Bits Agent Builder.

What is the main risk facing high-growth AI software stocks?

Strong business performance does not eliminate valuation sensitivity. The provided market data showed Palantir trading at 87.59 times forward earnings before its September pullback and CrowdStrike at 146 times projected next-year earnings following its earnings rally.

This article was created with AI assistance and reviewed by an editor. For details, please refer to our Terms of Use.

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