Three Software Stocks Raising Concerns for Investors

Three Software Stocks That Worry Us

Last updated on May 21, 2026May 21, 2026 by Neil Hemmings on Categories Software

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Software Firms Confront Challenges Amid Market Retreat

In recent times, software solutions have become a crucial factor in minimizing operational expenditures for businesses.

Enterprises at the forefront of this technological evolution have enjoyed substantial valuation multiples, facilitating their fundraising endeavors.

However, a noteworthy decline of 8.3% over the past six months within the industry starkly contrasts with the S&P 500’s commendable 11.3% increase.

Given the precarious nature of these valuations, a prudent strategy is essential, especially considering the potential disruptions posed by advancements in artificial intelligence on earnings capabilities. Therefore, we present three software stocks that warrant careful consideration.

Rapid7 (RPD)

Market Capitalization: $488.5 million

Named to emphasize the urgency in addressing cyber threats, Rapid7 (NASDAQ: RPD) specializes in cybersecurity software and services designed to assist organizations in identifying vulnerabilities, monitoring threats, and responding adeptly to security breaches.

Reasons for Our Hesitance Regarding RPD:

The company’s offerings have struggled to gain traction, reflected by stagnant billings over the preceding year.
In a fiercely competitive landscape, Rapid7 is compelled to amplify spending on sales and marketing—even when the return on such investments is minimal.
Operating expenses have increased as a percentage of revenue during the past year, with a dip of 1.7 percentage points in operating margin.

Currently priced at $7.18, Rapid7’s stock suggests a valuation ratio of 0.6x based on forward price-to-sales. Consult our complimentary research report to discover compelling reasons to reconsider adding RPD to your investment portfolio.

Institutional Investors in One Software Technologies Ltd (TLV:ONE) Experience 5.1% Loss This Week, But Enjoy Long-term Profits

ZoomInfo (GTM)

Market Capitalization: $1.08 billion

Operating a platform dubbed “RevOS,” or Revenue Operating System, ZoomInfo (NASDAQ: GTM) provides critical business intelligence and analytics to sales, marketing, and recruiting teams, facilitating targeted outreach to potential clients.

Reasons for Our Avoidance of GTM:

Flat billings over the past year indicate potential difficulties in selling its software, raising the likelihood of price reductions to spur growth.
Projected sales are expected to decline by 5.9% over the next year, suggesting an increasingly challenging demand landscape.
With the anticipated decline in its free cash flow margin by 4.2 percentage points, capital intensity is likely to escalate.

Trading at $3.69 per share, ZoomInfo has a forward price-to-sales ratio of 1x. Investigate our free research report to uncover superior investment alternatives to GTM.

Bentley Systems (BSY)

Market Capitalization: $10.44 billion

Renowned for pioneering the “digital twin” concept for infrastructure projects well before it became a catchphrase, Bentley Systems (NASDAQ: BSY) offers software solutions that empower engineers to design, construct, and manage infrastructure projects across various sectors, such as transportation, utilities, and industrial facilities.

Reasons for BSY’s Shortcomings:

Annual ARR growth was a modest 12.8%, indicating that competition is detracting from its software’s market appeal.
A projected growth of only 11.9% over the next year signifies potential softness in demand.
Consistent operating margins over the past year highlight a lack of increased operational efficiency.

Bentley Systems is currently valued at $33.69 per share, equating to 6.1x forward price-to-sales. For an in-depth assessment of the risks associated with BSY, be sure to explore our comprehensive research report—available at no cost.

Identifying High-Quality Stocks for Varied Market Conditions

A wooden block spelling the word stock on a table

AN ADDITIONAL NOTE: Top 5 Growth Stocks. Historically, the most successful stock performers share one commonality – exceptional revenue growth. Companies such as Meta, CrowdStrike, and Broadcom exemplify this, with returns of 315%, 314%, and 455%, respectively, as identified by our AI.

The stock selections from 2020 included well-known names like Nvidia (+1,326% from June 2020 to June 2025) along with lesser-known firms like Kadant (+351% five-year return). Unearth your next investment success with StockStory today.

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Reported By

Neil Hemmings

I'm Neil Hemmings from Anaheim, CA, with an Associate of Science in Computer Science from Diablo Valley College. As Senior Tech Associate and Content Manager at RS Web Solutions, I write about AI, gadgets, cybersecurity, and apps – sharing hands-on reviews, tutorials, and practical tech insights.