Investors came into 2026 worried about an AI bubble. Indeed, a bubble is bursting, but it's not in AI stocks.
Instead, software stocks have dived this year with the iShares Expanded Tech-Software Sector ETF (IGV 0.10%), which counts Microsoft, Palantir, and Salesforce among its biggest holdings, down 24% year-to-date through Feb. 25 as fears of AI disruption have sparked a wave of selling in high-priced software-as-a-service (SaaS) stocks.
While some of the selling seems justified given the lofty valuations in the sector and the rapid advancement of AI tools like Claude Cowork, some SaaS stocks seem oversold. Keep reading to see why Figma (FIG 4.38%) and Axon Enterprise (AXON 4.71%) look like buys, especially after their recent earnings reports.
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1. Figma (down 74%)
Figma went public seven months ago, and the stock has been on a wild ride since then. The design software stock surged out of the gate, but has faded since then, sinking as low as $20 a share, or a market cap of just $10 billion, half of what Adobe agreed to acquire it for in 2022 before the deal was blocked by regulators.
After a rebound over the last week, the stock is still down 74% from its closing-day peak shortly after it went public.
However, the fears around Figma seem overblown as the company is both growing quickly and has demonstrated generally accepted accounting principles (GAAP) profitability. The company has also launched a number of AI products and has moved aggressively in AI through both acquisitions and native products.
In fact, the company just posted accelerating revenue growth in its fourth quarter as the top line jumped 40% to $303.8 million, which included a record for net new revenue and 136% net dollar retention rate, showing revenue from existing customers rose 36% over the last year.
NYSE: FIG
Key Data Points
AI products like Figma Make are experiencing strong growth with weekly active users up 70% quarter-over-quarter, and Figma is working closely with Anthropic, showing that AI start-ups are likely to be more of a partner than a competitor. For example, it launched the Figma Model Context Protocol (MCP) app in Claude. It also expanded its Figma app in ChatGPT and released a new Claude Code to Figma feature.
Figma called for first-quarter revenue growth of 38% and sees adjusted operating income of $100 million-$110 million for the year.
Figma stock is still expensive, but it has a lot of long-term growth potential as it has rapidly gained market share on Adobe in recent years. With a savvy AI strategy, Figma looks poised to continue to deliver strong growth.
2. Axon Enterprise (down 40%)
Axon Enterprise has been a longtime winner on the stock market, and it's established itself as the clear leader in its niche.
Axon is a law enforcement technology company known for making TASER electrical weapons, body cameras, and a suite of software programs to help law enforcement agencies manage records, evidence, prosecutions, and related matters.
The TASER maker is also coming off a strong earnings report with revenue up 39% to $797 million, and adjusted earnings before interest, taxes, depreciation, and amortization (EBITDA) of $206 million, up 46%.
NASDAQ: AXON
Key Data Points
In addition to that impressive growth rate, Axon is also investing aggressively in AI. It introduced Draft One, a generative AI tool that generates first drafts of police reports from footage from Axon body and dashboard cameras.
It also launched an automatic license plate recognition (ALPR) product, expanding its vehicle intelligence program, and it's using AI to unify data across platforms, including in its emergency response program.
Axon is pushing back on the AI disruption narrative not only with its own AI products, but also with a forecast to deliver $8 billion in revenue in 2028, implying annual growth of about 30% through the next three years.
Even after its recent sell-off, Axon isn't cheap, but the company has built a strong set of competitive advantages and looks poised to deliver rapid growth for years to come.
