Jobs Report Reaction, Software Surge, Back-to-School Stock Picks 8/7/26

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**Kelly Evans** (1:04)
Welcome to Power Lunch alongside Dominic Chu. I'm Kelly Evans. Brian will be back on Monday. Stocks are in the green today. Yields are also lower following that week, July jobs report and expectations for the Fed's next move are shifting. Wells Fargo's Chief Economist, Tom Porcelli is here.

**Dominic Chu** (1:20)
All right, and a Portfolio Power Check Investor, Nancy Tangler, with her big portfolio rebalance, what she's buying and what she's selling, that's coming up. But we start with software. Remember that SaaSpocalypse. That's looking like a distant memory these days. Take a look at Atlassian soaring more than 30 percent after beating on quarterly earnings on pace for its best day ever. Historical. It's not alone. Twilio, 5.9, also up double digits, helping send the IGV ETF higher, stronger earnings, upbeat guidance, assuaging some investor fears of the AI disruption in the total industry.
Let's bring in Fatima Boolani, Co-Head of US Software Equity Research at Citigroup.
This is an interesting move because it wasn't that long ago we spoke to you about maybe some of the gyrations that were happening, but now it seems like sentiment has shifted, not wholesale. There's still a way to go to catch up. But what exactly is, at least in your mind, more definitive about this turn in sentiment versus what we've seen over the course of the past six to nine months?

**Fatima Boolani** (2:25)
Thanks for having me. Look, I think the theme and the word of the day is acceleration. We saw acceleration in very important KPIs out of both Cloudflare and Atlassian, and really that is starting to turn the tide and effectively creating a vibe and perception shift, especially for Atlassian around AI displacement fears. So we're seeing a little bit of that unwind and maybe a little bit of evaporation of that terminal risk and terminal concern fears that AI natives or the frontier labs are going to vibe code their way into disrupting Atlassian's core business proposition and competitive mode.

**Dominic Chu** (3:06)
What have you seen fundamentally from these earnings reports, from the company commentary, their outlooks, that is supportive in your mind as a fundamental analyst, that these at least moves can be justified in the coming months and quarters?

**Fatima Boolani** (3:23)
Well, there's the beat and raise. So on the back of the business is accelerating and reporting, accelerating revenue growth and accelerating backlog and bookings growth with confidence that businesses that are engaging with and procuring the software are signing larger deals, are signing larger commitments, and are doing this on a multi-year basis. That is a huge confidence check in undergirding what we think are probably more resilient fundamentals for enterprise software. So really it's delivering on accelerating metrics in quarter and talking to better guidance and better outlooks with beaten raises effectively.

**Kelly Evans** (4:01)
Fatima, who's next?
To see these pops, it is kind of exciting, especially for an area that was so under pressure. And yes, look at what's happening. It's helping the alternative asset managers, anybody with software exposure, which is not to say that everywhere is coming up roses, but who else do you think is kind of in the sweet spot right now? And it'd be nice to have more, you wake up in days like this and see more big movers like that.

**Fatima Boolani** (4:27)
You know, I'd love to give you a controversial answer, but what we've seen in enterprise software has generally been a tale of two cities, right? You've seen the infrastructure software stocks of which CloudFlare would be a part, of which cybersecurity names would be a part, relatively insulated from a lot of the fear and loathing with respect to AI disruption.
So, you know, the message is really, you have to stick to those infrastructure software players, right? Now, are there gems within that neighborhood? We think so. Datadog is a name that reported this week. The stock closed off pretty materially, closed down pretty materially, and that was largely on the basis of some of their commentary around a very large nine-figure customer, you know, reducing their usage, right? And we generally think that's a red herring because the rest of the business, the entirety of Datadog's business accelerated, right? So we think that the focus has been misplaced, and this is a name, whilst not cheap, on a relative basis to a crowd strike, to a cloud flare, growing at comparable, if not better rates, you're getting a little bit of a valuation arbitrage for a very high-quality business.