Analyst Weekly, February 16, 2026
Software program simply had its worst non-recession droop in 30 years. Over the previous 12 months, the group has fallen greater than 30% at its worst level which is the deepest drawdown exterior of a recession in three many years. Roughly $2 trillion in market worth has been erased, and Software program’s weight within the S&P 500 has dropped from 12% to eight.4%.
What spooked the market?
Two forces hit directly:
AI anxiousness. Traders started pricing in a situation the place new giant language fashions would cannibalize conventional software program quicker than incumbents may adapt.
Technical capitulation. De-risking accelerated. Quick curiosity in large-cap software program moved towards cycle highs. Sentiment turned decisively bearish. Promoting grew to become broad: high quality names and speculative development alike have been hit.
The market successfully priced in a “worst-case AI disruption” narrative.
However, fundamentals didn’t collapse
Consensus expectations for 2026 nonetheless name for:
~16% gross sales development; ~17% earnings development
Slight margin enlargement
Current earnings help that resilience:
Each S&P 500 Software program firm reporting thus far beat earnings.
Income beats are working above latest averages.
Progress stays stable double-digit.
In the meantime, valuations have compressed materially:
Ahead P/S multiples have fallen by roughly 4 turns.
Ahead P/E has dropped by greater than 10 factors.
Present multiples sit close to ranges seen throughout prior market stress episodes.
In different phrases, costs have reset quicker than fundamentals.
Supply: Bloomberg. Knowledge as of February 15, 2026.
AI: menace or tailwind?
In our view, the near-term actuality is extra nuanced than the headlines.
Enterprise software program is embedded in multi-year contracts with excessive switching prices. AI instruments are more and more being layered into workflows relatively than changing them outright. In lots of instances, AI appears additive, creating cross-sell and upsell alternatives, and never instantly disruptive.
Long run, the construction of the trade might evolve. However over the subsequent 3 to six months, the market might have discounted a disruption curve that’s too aggressive.
Why this issues for buyers
For buyers, this setup creates two angles:
Tactical rebound potential: Excessive pessimism & brief positioning & earnings season indicate a fertile floor for sharp reversals if outcomes or steering problem the bearish narrative.
We’re watching upcoming catalysts:
A busy calendar of software program earnings within the coming weeks.
Investor days the place administration groups can instantly deal with AI considerations.
If positioning resets, rebounds will be swift, particularly in higher-quality segments like cybersecurity and mission-critical enterprise platforms.
Longer-term high quality publicity at decrease entry factors: Many large-cap software program corporations nonetheless generate sturdy free money move, preserve sturdy buyer bases, and are growing buybacks. In actual fact, buyback execution in software program has grown meaningfully over the previous two years, which may present further help at depressed valuations.
Some corporations are seen to be comparatively extra insulated because of their positioning inside enterprise programs, safety infrastructure, or vertical niches. Right here’s how that panorama breaks down.
Enterprise & Mission-Vital Platforms
These platforms sit on the middle of enterprise structure. Their merchandise are sometimes tied to multi-year contracts, mission-critical workflows, and excessive switching prices; elements that may reasonable near-term displacement threat. Right here, we have now corporations comparable to:
Microsoft (MSFT): Azure continues to scale as a foundational cloud and AI infrastructure layer.
ServiceNow (NOW): Workflow automation platform embedded throughout giant enterprises.
Oracle (ORCL): Database and cloud infrastructure spine with AI capabilities layered in.
SAP: Core ERP programs deeply built-in into world company operations.
Cybersecurity
Safety spending is often considered as important relatively than discretionary. AI instruments are more and more being integrated into menace detection and response, suggesting integration relatively than substitute within the close to time period. Right here, we have now corporations comparable to Palo Alto Networks (PANW);CrowdStrike (CRWD); Zscaler (ZS); Okta (OKTA); SentinelOne (S).
Knowledge & Infrastructure
As AI adoption expands, demand for information storage, processing, monitoring, and safe connectivity stays central to enterprise operations. Infrastructure layers typically scale alongside application-level innovation. Right here, we have now corporations comparable to Snowflake (SNOW); Datadog (DDOG); Twilio (TWLO); Examine Level (CHKP)
Utility & Vertical Software program
Vertical software program suppliers typically function in specialised industries with regulatory complexity and customised workflows. Lengthy contract durations and domain-specific integration can contribute to income visibility. Right here, we have now corporations comparable to:
Tyler Applied sciences (TYL): Public sector software program supplier.
Guidewire (GWRE): Insurance coverage core programs.
SailPoint (SAIL):Identification governance options.
JFrog (FROG): DevOps and software program provide chain tooling.
Q2 Holdings (QTWO): Digital banking software program.
CoStar (CSGP): Actual property information and analytics platform.
Throughout all these classes, the frequent thread is structural embeddedness: programs that enterprises depend on day by day. Whereas AI is reshaping software program broadly, the diploma and velocity of disruption might range considerably relying on how central a platform is to operational infrastructure.
Funding Takeaway: The market is pricing in extreme AI disruption. The information, thus far, exhibits resilient development and earnings beats. Additional draw back can’t be dominated out as volatility stays elevated. However in our view, the chance/reward profile has shifted. When sentiment is that this unfavorable and fundamentals stay intact, the steadiness of dangers typically begins to favor restoration relatively than continued collapse. For retail buyers, the important thing query just isn’t whether or not AI modifications software program: it’s going to, however not uniformly. The query is whether or not right this moment’s costs already assume an excessive amount of harm, too quickly.
Huge in Japan: The Comeback Commerce No one’s Crowded Into
For years, Japan was the market equal of “seen at 9:41pm.” Traders glanced… then went again to the S&P 500.
However 2026? Completely different vibe.
Begin with valuations. Whereas US shares commerce north of 20x earnings, Japan’s sitting nearer to the mid-teens. Not distressed. Not bubbly. Simply… cheaper. And earnings are literally bettering.
Then there’s reform vitality. The Tokyo Inventory Change has been nudging corporations buying and selling under ebook worth to form up: increase returns, enhance governance, unlock worth. In different phrases, company Japan is being pushed to behave extra shareholder-friendly.
Coverage’s shifting too. Japan is lastly exiting ultra-easy cash mode. Which means larger yields and a firmer yen; which sounds dramatic, however actually alerts one thing more healthy: normalization. After many years of deflation fears, Japan is reflating.
Lastly, positioning. Home buyers are nonetheless underweight equities. Add in world provide chains diversifying away from China, and Japan all of a sudden appears strategically related once more.
So no, we don’t assume it is a late-cycle melt-up story.
It’s a reform, reflation, and affordable valuation story.
Palo Alto Networks Defends Assist – Earnings in Focus
Palo Alto Networks shares recovered 4.9% final week to $166.95. The technical set off was the profitable protection of the help zone (Truthful Worth Hole) between $151.20 and $154.40 within the prior week. This space has already acted as a help zone twice over the previous two years.
The rebound lowered the gap to the file excessive to round 25%, after the drawdown had briefly widened to 32%.
Quarterly earnings are due after the shut on Tuesday. They’re prone to decide whether or not the restoration continues or whether or not the long-term help zone will face one other take a look at.
To sustainably enhance the chart image, a transfer above the interim excessive at $188.80 can be required – that is the place the newest promoting wave started. The 20-week transferring common, at present close to $186, can be situated on this space. A break again above this degree may entice further consumers, however each resistance ranges would have to be cleared decisively.
On the draw back, the subsequent related help zone lies between $133.80 and $140.10.
Palo Alto Networks, weekly chart. Supply: eToro
USDJPY Posts Strongest Weekly Decline Since November 2024
USDJPY fell 2.8% final week to 152.75, marking its strongest weekly decline since November 2024. Again in January, consumers had already failed at a long-term resistance zone, a Truthful Worth Hole between 158.85 and 160.33. An analogous sample occurred in early 2024.
Final week, the pair not solely reversed decrease but in addition dropped under the 20-week transferring common, at present at 154.39. This alerts a short-term shift in route and will increase the chance of additional declines (see blue rectangles within the chart).
From a broader perspective, the world round 141 comes into focus as a possible draw back goal. Since 2023, this zone has been examined a number of occasions and repeatedly acted as help.
Nevertheless, if the pair climbs again above the 20-week transferring common, one other take a look at of the resistance zone between 158.85 and 160.33 can be attainable. For now, the technical setup factors to continued promoting stress.
USDJPY, weekly chart. Supply: eToro
BTC in a Delicate Adjustment Section
Bitcoin enters a brand new week in a fragile part. The correction from the October highs is round 50%, and though we have now seen technical rebounds from the $60,000–62,000 USD space, structural information nonetheless don’t present clear indicators of a definitive backside.
Probably the most putting transfer occurred on February 5, when the market recorded roughly $5.4 billion in realized losses in a single day. It was the most important loss realization occasion since March 2023. At first look, it could possibly be interpreted as capitulation. Nevertheless, when the lens is widened, the context modifications.
Cumulative losses measured in BTC phrases are round 0.3 million. Throughout the 2022 bear market, that determine exceeded 1.1 million BTC. In different phrases, the adjustment has been important, however it nonetheless doesn’t attain structural cleaning ranges similar to earlier cycle bottoms.
Traditional cycle metrics reinforce that studying. MVRV has not entered excessive undervaluation territory. NUPL doesn’t mirror unrealized loss ranges typical of deep capitulation. Roughly 55% of whole provide stays in revenue, whereas at historic lows that proportion approached 45–50%. As well as, value continues to commerce above the realized value (the common buy value of all BTC holders), situated round $55,000 — a degree that in earlier cycles was clearly breached earlier than a base was shaped.
Market bottoms are not often remoted one-day occasions. They’re processes that require time, volatility compression, and emotional exhaustion.
On the identical time, the macro setting stays decisive. Expectations of upper charges for longer proceed to restrict threat urge for food. Till there are clear indicators of financial easing, it’s troublesome for flows to return with sustained energy to the belongings most delicate to liquidity, comparable to bitcoin.
On the institutional entrance, ETFs have recorded weekly outflows of roughly $360 million. It isn’t a disorderly determine nor similar to systemic panic episodes, however it confirms that structural shopping for flows haven’t but returned decisively. Nor are we seeing large liquidations from long-term buyers, suggesting the market is in an adjustment part relatively than a collapse. All of this paints a transparent image: the market has corrected sharply, cleaned a part of the surplus, however nonetheless doesn’t show the basic signs of a mature backside.
This doesn’t essentially indicate that one other abrupt decline should happen. It means the method might lengthen over time. Consolidation phases following main bull cycles are usually extended and require gradual rebuilding of confidence and flows.
For the investor, the message is extra strategic than tactical. It isn’t about anticipating the precise backside, however about understanding the context. Within the absence of clear structural capitulation alerts and with a still-restrictive macro setting, prudence stays coherent within the brief time period.
On the identical time, the correction has already considerably lowered valuations from the highs, which begins to open home windows for gradual accumulation on longer horizons, supplied one assumes volatility will stay current.
The week forward will possible not outline the cycle. However it might present clues concerning the velocity of the adjustment and the resilience of help across the $60,000 space. In markets like this, self-discipline and endurance are sometimes extra worthwhile than the frenzy to anticipate the flip.
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