The software space has generally been a great place to look for winning stocks over the past decade or so. But some investors are unaware of many of the software stocks out there. The reason for this is that not all software is for everyday people; a lot of software is built specifically for business needs.
This is called enterprise software. And Asana(NYSE: ASAN), Atlassian(NASDAQ: TEAM), and Docusign(NASDAQ: DOCU) make some well-known software used by businesses worldwide. That said, for those who bought at the start of 2022 and dutifully held through the end of 2023, returns were pretty bad.
Macroeconomic headwinds and uncertainty had enterprises rethinking how much they wanted to spend on software, which hurt revenue growth rates for companies such as Asana, Atlassian, and Docusign. This is why all underperformed the S&P 500 during this two-year span.
That said, these stocks are perking up as the ice in enterprise software spend starts to thaw. That's why all three have crushed the S&P 500 over the last six months and why now is a timely moment to consider which of these stocks is the best buy for 2025.
Asana is tapping into the AI growth trend
Asana lets businesses assign tasks to certain people, setting due dates and linking individual duties to bigger-picture goals. The company talks about answering the who, what, when, and why. This is something many businesses can benefit from. And for its part, Asana has more than 150,000 paying customers in over 200 countries.
If you paid any attention to the stock market this year, it might feel like a broken record at this point. But Asana, like almost all software companies, is launching artificial intelligence (AI) products. Management expects its AI studio to be big -- perhaps even bigger than the scale of its current business. Moreover, Asana's AI studio is just now launching, but some customers like it so much that they are skipping a pilot period and going straight to a subscription.
To be sure, Asana's growth is slow. In its fiscal third quarter of 2025, the company's revenue was only up by 10% and that's the same growth rate it expects for the fourth quarter. But fiscal 2026 (overlapping with much of calendar year 2025) could enjoy an accelerated growth rate as its customers buy its AI products.
Atlassian may be downplaying its growth potential
Atlassian is a multiproduct enterprise software company. It has Confluence for content creation, Jira for workflow management (not unlike Asana), and other tools. The company isn't new and the big trend in recent years has been its shift away from its legacy business to a cloud software subscription business model.
Atlassian's fiscal 2025 began in July and goes through the end of June 2025. For the year, management expects 17% top-line growth compared to fiscal 2024. That's slower than its 23% growth in fiscal 2024, which isn't ideal.
That said, Atlassian may be downplaying its potential for growth. Management said its guidance is conservative and considers a lot of things that could go wrong.
Furthermore, Atlassian's deferred revenue for the first quarter of fiscal 2025 jumped 34% year over year, representing future spending commitments from its customers. In the same quarter of its fiscal 2024, deferred revenue was only up by 28%. So this year is already off to a better start than last year, which again suggests that its growth will be better than advertised.
Docusign customers like the new AIM platform
Docusign's e-signature software is likely the most well-known product of these three enterprise software companies -- many people have likely done business with a company that's asked for a signature using a Docusign product. But as established as it is in this space, investors might be surprised by a recent surge in its business trends.
Although it's been around a while, Docusign updated its platform in 2024, calling its new AI-powered platform Intelligent Agreement Management (IAM). Key features include AI summaries of what's being signed, reminders of when things expire, and more. And CEO Allan Thygesen believes it will push it toward sustaining "long-term double-digit growth."
To underscore the positive reception here, Docusign closed 10 times more IAM deals in its fiscal third quarter of 2025 as compared to the second quarter. That's quite the sequential jump and shows that customers have an appetite for this new platform.
Shareholders are happy to see Docusign's refresh off to a good start. That said, the company is playing the long game and the promise of double-digit growth is still somewhere down the road. For now, its fiscal Q3 revenue was only up by 8% and it only expects 7% growth in the upcoming fourth quarter, which ends Jan. 31.
Which is the best buy for 2025?
As mentioned, it's possible that Atlassian is understating its growth potential in the coming year. But taking the three outlooks at face value, Atlassian and Docusign are still decelerating whereas Asana's growth is stabilizing and could potentially reaccelerate as its AI tools generate some excitement.
Turning to valuation, Docusign and Asana trade at a virtually identical price-to-sales (P/S) ratio of almost 7 whereas the P/S valuation for Atlassian is more than double this.
Atlassian has better profitability so it arguably deserves a premium over the other two. But if I had to choose a stock here, I'd choose Asana. Its valuation is relatively low, its growth is stabilizing, and AI could boost the business fairly soon given its promising launch.
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Jon Quast has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Atlassian and Docusign. The Motley Fool recommends Asana. The Motley Fool has a disclosure policy.
