Cathie Wood Says Software Is The Next Big AI Opportunity – Here's 1 Super Stock You'll Regret Not Buying In 2026 If She's Right

PTC isn’t getting much help from macroeconomic conditions, but the key metric is still growing strongly as it adds tangible value.
Infusing AI into the software will increase the effectiveness of the company’s solutions.
The next phase of AI investing will focus on companies using AI to improve their customer offerings, and PTC is one of them.
10 stocks we like better than PTC ›

Cathie Wood’s Ark Invest holds shares PTC (NASDAQ: PTC) as one of the top positions The ETF for 3D printing (NYSEMKT: PRNT)and with good reason. The industrial software company’s solutions and growth catalysts embody the idea that artificial intelligence (AI) will significantly increase the effectiveness of software. The results of integrating AI into PTC’s software are tangible, and the good news is that PTC’s valuation is extremely attractive after the recent dip.

PTC is a leader in enabling companies to digitally transform their product design, manufacturing, operations, service and disposal processes. The computer-aided design (CAD) software enables the design of a product; the product lifecycle management (PLM) software acts as a repository for all data from that product’s life cycle; its Application Lifecycle Management (ALM) service manages the lifecycle of software applications; and the service lifecycle management (SLM) offering manages the post-service lifecycle of the product.

The key selling point of these software solutions in the digital age is their ability to work together in a ‘digital loop’, where a manufacturer can use insights from digital analysis of raw data from one part of the loop to improve the entire process. For example, SLM might propose to change the design of a product using CAD, and PLM will enable monitoring and control of the changes resulting from that design implementation. The digital loop is an ongoing and iterative process that is revolutionizing manufacturing.

But here’s the most important question. What if AI can be used to enhance digital analytics, adding value to PTC’s solutions and ultimately increasing the value it delivers to customers? That’s exactly what PTC does, and it will inevitably improve the computing power and effectiveness of the digital loop.

As CEO Neil Barua said on a recent earnings call, “Our confidence in FY26 is underpinned by our focus on our intelligent product lifecycle vision. AI reinforces the importance of structured product data foundations.” He continued: “We are improving our CAD, PLM, ALM and SLM offerings to make it even easier to build a product data foundation, and we are integrating more AI.”

If the power of digital analytics is the key to greater adoption of PTC’s software solutions, AI will only improve them.

Image source: Getty Images.

Before you consider buying PTC stock, it’s essential to remember two important points. First, the industrial sector, especially the manufacturing sector, has experienced a prolonged slowdown in recent years. This is how the latest report from the Institute for Supply Management presents the situation: “Economic activity in the manufacturing sector contracted for the eighth month in a row in October, after a two-month expansion preceded by 26 consecutive months of contraction.”

As such, PTC hasn’t gotten much cyclical help from conditions in the US manufacturing sector lately.

Second, the most important metric to measure long-term growth, and one that determines free cash flow (FCF) growth, is the organic annual run rate (ARR), which represents the annualized value of the subscriptions and contracts.

ARR growth has slowed in recent years and management’s 2026 forecast is below the low-double-digit growth rate management is targeting. In fact, this expectation is a large part of the reason for the stock’s sell-off following its recent earnings report for the fourth quarter of fiscal 2025, which ended on September 30.

Metric	Fiscal 2023	Fiscal 2024	Fiscal 2025	Fiscal 2026 (estimated)
ARR	$2.047 billion	$2.285 billion	$2.478 billion	$2.673 billion
Organic ARR growth in constant currency	13%	12%	8.5%	7.5% to 9.5%*
Free cash flow	$587 million	$736 million	$857 million	$1 billion*
FCF growth	41.1%	25.4%	16.4%	16.7%

Data source: PTC presentations. *Excluding the impact of divestitures, which is estimated at $160 million in one-time transaction-related costs.

Still, the sale is a good time to buy:

The forecast ARR growth rate at constant exchange rates is still in the high single digits, and would have been even higher if not for the manufacturing sector.
FCF continues to grow faster than ARR, in line with management expectations, as PTC costs tend to increase at half the rate of ARR growth.
The underlying FCF of $1 billion in 2026 would put PTC at a price/FCF multiple of 21.5 – cheap for a company with its ARR and FCF growth rates.

An investor looking at a screen. — Image source: Getty Images.

Despite challenging end markets, PTC has continued to expand its key metrics. Its valuation is compelling, and the added growth driver from the increasing infusion of AI into the software will add value and growth in ARR. If Wood’s belief in the power of AI in software and PTC is justified, then PTC is a good investment opportunity right now.

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Lee Samaha has no positions in the stocks mentioned. The Motley Fool holds and recommends PTC. The Motley Fool has a disclosure policy.

Cathie Wood Says Software Is the Next Big AI Opportunity — Here’s 1 Super Stock You’ll Regret Not Buying in 2026 If She’s Right, originally published by The Motley Fool