4 software stocks facing guidance risks in 2026, Morgan Stanley warns

Investing.com -- Morgan Stanley has flagged four U.S. software companies that could face downside risk when they issue initial guidance for 2026, even as the broader setup across the sector looks more constructive than in recent years.

In a note assessing risks to 2026 guidance, Morgan Stanley analyst Sanjit Singh said consensus expectations are “set up more attractively than prior years,” with only four of the 11 companies in its coverage universe screening as potentially vulnerable. 

Still, the analyst “does see risk for DDOG, GTLB, PATH & PD” when companies begin outlining their full-year outlooks.

Morgan Stanley identified Datadog and PagerDuty as the names facing the clearest risks. 

PagerDuty “screens risky in its most reliable measure,” while Datadog faces added uncertainty despite appearing achievable across quantitative screens, with the bank citing “greater conservatism around OpenAI revenue contribution in CY26.”

The bank said GitLab and UiPath face more modest risks. For both companies, Morgan Stanley noted that while consensus estimates appear achievable, it assigns “additional risk from upcoming pricing headwind and likely greater conservatism.”

By contrast, Morgan Stanley feels 2026 estimates look “at least achievable” for several peers, including Akamai, MongoDB, Palantir and Snowflake. 

The firm added that Appian and JFrog are “best positioned to guide inline to above current consensus estimates.”

Overall, Morgan Stanley said the picture for 2026 is “less onerous than in 2025,” when a larger share of companies ultimately guided below expectations, but warned that investors should still brace for selective disappointments.