The Nasdaq composite has lost 30.4% year-to-date in the face of consecutive rate hikes. However, amid rapid digitalization, demand for software goods and services is expected to thrive in the coming years.

According to Gartner Inc. (IT), worldwide IT spending is expected to increase 5.1% year-over-year to $4.60 trillion in 2023. Out of that, software spending is expected to rise 11.3% from the prior year to almost $880 billion.

Furthermore, according to The Business Research Company, the software products market is projected to grow at a CAGR of 11.8% until 2026.

Given this backdrop, we think trending and fundamentally strong software stocks Oracle Corporation (ORCL) and Synopsys, Inc. (SNPS) are ideal buys now.

Oracle Corporation (ORCL)

ORCL offers products and services that address enterprise technology environments. The company provides Oracle cloud software, including Oracle Fusion cloud enterprise resource planning (ERP) and Oracle Fusion cloud enterprise performance management. The stock trades at an average volume of 8.54 million.

On October 19, 2022, ORCL introduced its new B2B Commerce services to eradicate the disparate systems, processes, and data integration challenges that make B2B transactions overtly complex.

The service expects to connect more than 40,000 buyers, sellers, and service providers directly via Oracle Cloud Enterprise Resource Planning and marks a new growth chapter for the company.

On October 18, 2022, ORCL and NVIDIA Corporation (NVDA) announced a multi-year partnership to help customers solve business challenges with accelerated computing and AI.

Safra Catz, ORCL's CEO, said, "Our expanded alliance with NVIDIA will deliver the best of both companies' expertise to help customers across industries – from healthcare and manufacturing to telecommunications and financial services – overcome the multitude of challenges they face."

ORCL's total revenues came in at $11.45 billion for the first quarter that ended August 31, 2022, up 17.7% year-over-year. Moreover, its cloud services and license support revenue came in at $8.42 billion, up 14.2% year-over-year. Also, its services revenue came in at $1.36 billion, up 74.3% year-over-year.

Analysts expect ORCL's revenue to increase 16.1% year-over-year to $49.29 billion in 2023. Its EPS is expected to increase marginally year-over-year to $4.95 in 2023. Over the past month, the stock has gained 27.8% to close the last trading session at $78.07.

ORCL's strong fundamentals are reflected in its POWR Ratings. The stock's overall B rating indicates a Buy in our proprietary rating system. The POWR Ratings assess stocks by 118 different factors, each with its own weighting. 

ORCL has a B grade for Growth and Stability. In the Software - Application industry, it is ranked #25 out of 146 stocks. Click here for the additional POWR Ratings for Value, Momentum, Sentiment, and Growth for ORCL.

Synopsys, Inc. (SNPS)

SNPS provides electronic design automation software products used to design and test integrated circuits. The company offers the Fusion Design Platform, Verification Continuum Platform, and FPGA design products that are programmed to perform specific functions. The stock trades at an average volume of 1.13 million.

On October 25, 2022, SNPS and SiFive announced their new partnership to co-develop the design and verification of SoCs based on SiFive RISC-V processors. Through the partnership, designers can attain optimal outcomes for their custom RISC-V-based SoCs.

On September 1, 2022, SNPS declared that it had replenished its stock repurchase program with an increased authorization to purchase up to $1.50 billion of common stock. This is expected to generate sustainable, long-term shareholder value.

SNPS' total revenue came in at $1.25 billion for the third quarter that ended July 31, 2022, up 18% year-over-year. Moreover, its net profit came in at $222.63 million, up 12.1% year-over-year. Its EPS came in at $1.43, up 12.6% year-over-year.

SNPS' revenue is expected to increase 20.8% year-over-year to $5.08 billion in 2022. Its EPS is expected to grow 29.4% year-over-year to $8.85 in 2022. It surpassed EPS estimates in all four trailing quarters. Over the past six months, the stock has gained marginally to close the last trading session at $291.17.

SNPS has an overall B rating, equating to a Buy in our POWR Ratings system. It has an A grade for Quality and a B for Sentiment. It is ranked #13 stocks in the same industry.

Beyond what is stated above, we've also rated SNPS for Value, Growth, Stability, and Momentum. Get all SNPS ratings here.

ORCL shares were trading at $76.60 per share on Wednesday afternoon, down $0.51 (-0.66%). Year-to-date, ORCL has declined -10.64%, versus a -18.18% rise in the benchmark S&P 500 index during the same period.

Rashmi is passionate about capital markets, wealth management, and financial regulatory issues, which led her to pursue a career as an investment analyst. With a master's degree in commerce, she aspires to make complex financial matters understandable for individual investors and help them make appropriate investment decisions.

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