BofA names top application software stocks heading into Q3 earnings

Investing.com -- Bank of America analysts highlighted three application software stocks they expect to deliver strong third-quarter results, emphasizing that selectivity has become critical in the sector as artificial intelligence and shifting budget priorities create separation between leaders and laggards.

The firm noted that investor focus remains on growth reacceleration, with increasing preference for application vendors demonstrating successful product cycles and a clear path to monetizing AI opportunities. While AI products are delivering measurable ROI, broader adoption remains constrained by governance, data, trust, and budgets, according to the note.

Bank of America also pointed to general-purpose AI agents from large technology platforms as a potentially important new competitive dynamic for application software vendors. Many application software stocks continue to trade at discount valuation multiples relative to broader software, though short interest has declined from earlier peaks this year.

Here are the stocks BofA is particularly bullish on heading into third-quarter earnings:

1. Box Inc (NYSE: BOX) - Bank of America recently named Box its top pick in the applications group, viewing the company as an underappreciated AI winner in the early stages of a multi-year growth acceleration while still trading at a discount to peers. The firm sees potential for Box to deliver its sixth consecutive quarter of growth acceleration, reaching 12% constant currency growth in the third quarter.

2. Samsara Inc (NYSE: IOT) - The firm's channel checks point to accelerating enterprise market share capture from point solution vendors, increasing confidence that net new annual recurring revenue, the key metric for Samsara, will come in ahead of buyside expectations in the third quarter.

3. Hinge Health Inc (NYSE: HNGE) - Bank of America sees upside this quarter from better-than-expected member expansion and average selling price performance. The firm's 51% revenue growth estimate sits above the Street consensus at 46%. Channel checks reinforce the view that continued eligibility expansion will support elevated growth into 2027.

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