Key Takeaways
- Bank of America has selected Snowflake, Datadog, JFrog, MongoDB, and Twilio as premier software investments for the second half of 2026
- These five companies have collectively surged 30% on average year-to-date, contrasting sharply with the broader software ETF’s 12% decline
- Each company exceeded earnings forecasts, generating an impressive average post-earnings rally of 36%
- Artificial intelligence demand serves as the primary catalyst driving expansion across all five firms
- BofA highlights that prudent management forecasts position these stocks favorably for additional earnings surprises
Koji Ikeda, a Bank of America analyst, has spotlighted five software infrastructure companies he expects will maintain their momentum through the latter half of 2026. This collection, referred to as the “Fab Five,” has significantly outperformed the broader software market year-to-date.
In stark contrast to the iShares Expanded Tech-Software Sector ETF’s 12% year-to-date decline, these five stocks have collectively climbed 30% on average. Ikeda reaffirmed Buy ratings across the entire group.
According to the investment bank, robust quarterly performance, measured forward guidance, and accelerating artificial intelligence integration are the primary factors positioning these equities favorably as we approach the year’s second half.
BofA’s Five Top Picks and Investment Thesis
Snowflake
Snowflake stock rocketed more than 35% in one trading session following its most recent quarterly disclosure. Product revenue expanded 34% compared to the same period last year, accelerating from the previous quarter’s 30% growth rate.
Bank of America highlights that the firm’s artificial intelligence product portfolio, featuring Cortex AI and Cortex Code, is increasingly integrated into corporate operational systems. Should AI adoption accelerate beyond current expectations, the stock could experience additional upside.
Datadog
Datadog emerged as the group’s top performer, skyrocketing nearly 70% post-earnings. Revenue growth reached 32% year-over-year, while AI-driven business now represents over 10% of total revenue and is expanding at an annual rate exceeding 100%.
Bank of America emphasizes that the observability sector remains among software’s most compelling investment categories, with Datadog strategically positioned to capture sustained demand.
JFrog
JFrog rallied 43% after delivering quarterly results. Cloud revenue growth accelerated to 50%, up substantially from the prior quarter’s 42% pace.
The company serves as a comprehensive risk mitigation solution within software development, spanning the entire supply chain from binary asset management through security protocols. BofA suggests that either a major enterprise contract or a significant software supply chain security incident could serve as a share price catalyst.
Twilio
Twilio shares jumped nearly 50% after exceeding analyst expectations. Gross-profit-dollar growth strengthened to 16% from the previous 10% rate.
Bank of America positions Twilio as critical infrastructure supporting business operations and AI agent communications across voice and messaging platforms. New voice AI partnerships and expanding profit margins represent the primary growth drivers the bank is tracking.
MongoDB
MongoDB recorded the most modest post-earnings appreciation among the five, advancing just 4.5%. Atlas revenue growth ticked up to 29.4%.
BofA maintains that MongoDB’s most significant AI-related opportunity remains on the horizon, connected to widespread deployment of consumer-facing enterprise AI applications. The bank suggests 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 issued cautious forward guidance despite delivering impressive quarterly results, creating potential for positive guidance revisions throughout the remainder of the year.
The investment bank anticipates investors will closely track whether artificial intelligence demand continues its trajectory and if enterprise implementation of emerging AI technologies can sustain the group’s exceptional growth rates.
Currently, BofA considers the Fab Five among the most attractively positioned software equities entering the second half of 2026.
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