Software Earnings This Week Could Spark a Bounce

The software sector has been taking a serious beating lately, and if you’re invested in tech, you’ve probably felt the pain. The once-hot software stocks, especially those in areas like cloud monitoring, mobile advertising, and game development tools, have seen sharp declines amid broader worries about AI disruption shaking up traditional business models. Yet, amid this gloom, some market watchers see a potential turning point right around the corner.

Could This Week’s Software Earnings Spark a Meaningful Recovery?

It’s no secret that the broader market has kept climbing in recent months, but certain pockets of technology—particularly software—have been left in the dust. The iShares Expanded Tech-Software Sector ETF, which tracks a basket of these companies, has dropped nearly 30% from its peak late last year. That’s a brutal drawdown by any measure. Fears that generative AI could render many existing software solutions obsolete have fueled the selling pressure. But is the pessimism overdone? Some seasoned strategists think so, pointing to a handful of upcoming earnings reports as potential catalysts for at least a short-term rebound. In my view, these moments of extreme sentiment often create the best opportunities for swing traders willing to take calculated risks. The key is timing and understanding where real support lies on the charts. This week stands out because three notable names in the software space are set to report results, and positive surprises could help lift the entire group off its lows.

Why Software Stocks Are Under So Much Pressure Right Now

Let’s start with the obvious: the market has rotated hard away from many high-growth software plays. Investors poured money into AI leaders—think chipmakers and foundational model developers—while pulling back from companies seen as vulnerable to disruption. Cloud-based analytics tools, ad tech platforms, and creative software suites have all faced scrutiny. When you layer in higher interest rates lingering in the background and economic uncertainty, it’s easy to see why valuations compressed so quickly. But here’s the flip side. Not every software company is equally at risk. Some have strong moats, recurring revenue streams, and exposure to secular trends that AI might actually enhance rather than replace. The selloff has been broad and indiscriminate, punishing solid businesses alongside weaker ones. That creates asymmetry—downside feels limited for some names, while upside could be explosive if sentiment shifts.

The beaten-down software space looks like a good opportunity to nibble for swing traders with risk tolerance.

– Market strategist commentary

That sentiment captures the current mood among some pros. They’re not calling for a full reversal of the bull market in big tech, but rather a tactical bounce in oversold areas. And earnings season is often when these rotations gain traction.

Key Earnings to Watch This Week

Three specific reports stand out as potential triggers. These companies have been hit hard, yet each brings unique strengths to the table. Positive results—or even just reassuring guidance—could spark buying in the broader software ETF and related names.

• Datadog: Reporting before the market opens Tuesday. As a leader in observability and monitoring for cloud environments, it benefits from the ongoing shift to distributed systems. Investors will watch for signs that enterprise spending remains resilient despite macro headwinds.
• AppLovin: Results after the bell Wednesday. This mobile app marketing and monetization platform has shown impressive growth in user acquisition tools. Any beat on revenue or margins could counter fears that ad tech is losing ground to AI-driven alternatives.
• Unity Software: Also reporting after the bell Wednesday. Known for its game engine and tools for creators, Unity has faced volatility but continues to power a huge portion of mobile and emerging interactive content. Guidance on future growth drivers will be critical.

These aren’t just random picks. They’re representative of different sub-sectors within software—monitoring, advertising tech, and development platforms—that have been dragged down together. If even two of them deliver upside surprises, the ripple effect could be significant for the group as a whole.

Technical Levels That Matter for a Potential Bounce

Charts don’t lie, and right now the software ETF shows classic signs of oversold conditions. After such a steep decline, major support zones often act as magnets for buyers looking to establish positions. One analyst highlighted a range between $80 and $77 as key historical support—levels that have held multiple times in past pullbacks. If the ETF can hold above that zone, it opens the door for a relief rally. I’ve seen this pattern play out before: sharp selloffs exhaust sellers, then earnings provide the spark for buyers to step in. Of course, nothing is guaranteed. A miss from any of these companies could extend the pain. But the risk-reward feels skewed positively for short-term trades. Perhaps the most interesting aspect is how quickly sentiment can flip. One strong quarter can change the narrative from “AI disruption doom” to “these businesses are more durable than feared.” That’s the kind of shift that moves stocks fast.

Don’t Forget About Cisco in the Mix

While the focus is on pure-play software, networking giant Cisco also reports after the bell Wednesday. The stock has held up better than many peers, but breaking above $85 could signal broader strength in enterprise tech spending. Cisco’s exposure to AI infrastructure—think data center networking—positions it well in the current environment. Analysts expect solid revenue growth and stable margins. If guidance reaffirms demand for AI-related hardware, it could provide additional tailwinds for tech overall. In my experience, when legacy tech names start outperforming, it often signals that the rally is broadening beyond just the hottest AI plays.

Broader Market Context and Risks to Consider

This isn’t happening in a vacuum. The Dow recently hit 50,000, but some call it a “hangover” phase where gains digest. Other data points this week—jobs numbers Wednesday and CPI Friday—could influence risk appetite. Strong economic prints might support growth stocks, while softer data could raise recession fears and pressure cyclicals.

1. Watch for any commentary on AI spending trends during earnings calls.
2. Monitor volume on any bounce—sustained buying is key.
3. Be ready for volatility; these are swing trades, not long-term holds.
4. Consider position sizing carefully given the uncertainty.

I’ve always believed that the biggest opportunities come when fear is high and conviction is low. Right now, software feels like one of those areas. The drawdown has been painful, but it may have created a setup where good news gets rewarded disproportionately. Of course, trading involves risk, and past performance isn’t indicative of future results. But for those with the stomach for it, this week could offer a chance to capitalize on mean reversion in a beaten-down sector. What do you think—buy the dip in software, or wait for more confirmation? The next few days should tell us a lot.