AI Bust or a Once-in-a-Decade Buying Opportunity for This Software Stock?

By Lee Samaha – Feb 20, 2026 at 12:15AM ESTKey PointsAI is an opportunity, not a threat, for PTC's business model, and growth in its key metric is set to rebound in the near future. The stock's valuation hasn't been this cheap in a decade. We’re bullish on these 10 stocks ›NASDAQ: PTCPTCMarket Cap$18BToday's Changeangle-down(-0.71%) $1.10Current Price$154.40Price as of February 19, 2026 at 4:00 PM ETThis stock genuinely offers investors an opportunity to buy into a growth story at a very reasonable valuation.It's no secret that the stock prices of many software companies have come under pressure over the last year. It's not just that investor focus has shifted toward stocks like Nvidia and other artificial intelligence (AI)-related companies; there's also fear that AI poses a threat to industrial software companies like PTC (PTC 0.71%). When compounded with the slowing growth in PTC's key metric -- the annual run rate (ARR) -- the stock's 10% decline over the last year is understandable. However, I think the market is wrong, and this is a great buying opportunity. Image source: Getty Images. PTC's declining growth and the AI threat The company is a leader in product lifecycle management (PLM) and computer-aided design (CAD) software that enables companies to create a digital thread for a product from design through production, servicing, and ultimately, disposal. These processes create a huge amount of digital data. PTC's preferred metric is ARR, or the "annualized value of our portfolio of active subscription software, SaaS, hosting, and support contracts." More ARR means more subscription revenue, which translates to more cash flow. Unfortunately, PTC's ARR appears to be slowing, with management forecasting adjusted organic ARR growth at constant currency of 7.5% to 9.5% in its financial 2026. That's fine in itself, but it's a long way from the mid-teens constant-currency ARR growth management previously predicted for 2026, just a few years ago. In addition, the market is concerned about the potential for AI models to generate real value from PTC's data or even for autonomous AI agents to take over design and manufacturing. ExpandNASDAQ: PTCPTCToday's Change(-0.71%) $-1.10Current Price$154.40Key Data PointsMarket Cap$18BDay's Range$151.69 - $155.0052wk Range$133.38 - $219.69Volume645KAvg Vol1MGross Margin82.60% AI is actually a major opportunity for PTC As anyone who has wasted time fact-checking AI-generated content knows, controlling what data AI sources is as important as the output it produces. As such, PTC's digital systems of record are the key data that AI needs to make ongoing actionable insights from a customer's digital thread. That's why PTC is embedding AI in its systems. Indeed, according to CEO Neil Barua on a recent earnings call: "Entering 2026, it became clear that customers don't want AI as another stand-alone system or workflow. They want AI embedded directly into the systems of record they already trust for their enterprise workflow. That's exactly where PTC Inc. is focused." AI isn't so much a threat to PTC as a major opportunity because when embedded in its systems, it will add value. ARR growth is coming As for the slowing ARR growth, it appears to be a near-term event, as management expects a steep change in ARR starting in the fourth quarter of the 2026 fiscal year, driven by large deals that aren't yet reflected in its ARR. To flesh out this point, Barua noted that deferred ARR (from contracts committed to but not yet starting) in the fourth quarter was "about triple what we had" entering the last fourth quarter. For reference, Barua reorganized PTC's go-to-market strategy in late 2024 to focus the company on generating larger-scale enterprise deals in its key industry verticals, using more specialized sales teams. PTC Price-to-Free-Cash-Flow data by YCharts. Management expects to hit $1 billion in free cash flow in 2026, which, based on the current market cap of $18.7 billion, would put it on a free-cash-flow multiple of 18.7. This represents a highly favorable valuation not seen in years.Read NextDec 10, 2025 •By Lee Samaha1 Stock With Monster Upside to Buy as the AI Trade Enters Its Next Phase in 2026, According to Wall Street AnalystsJul 27, 2025 •By Lee SamahaForget a Takeover From Autodesk, PTC Is a Great Stock to Buy Anyway. Here's Why.Feb 6, 2025 •By Lee SamahaHere's Why PTC Stock Declined This Week (and Why It Looks Like a Good Value Now)Dec 21, 2024 •By Lee SamahaThis Software Stock Could Be the Best Investment of the DecadeNov 21, 2024 •By Lee SamahaA Few Years From Now, You'll Wish You'd Bought This Undervalued StockAug 11, 2024 •By Lee Samaha1 Magnificent Software Stock Down 10% to Buy and Hold ForeverAbout the AuthorLee Samaha is a contributing Stock Market Analyst at The Motley Fool covering industrials, electricals, energy, materials, transportation, and infrastructure stocks. Prior to The Motley Fool, Lee was a Civil Engineer and Investment Manager. He holds a Bachelor of Civil and Structural Engineering from Southampton University and a Certificate in Investment Management from Chartered Institute for Securities & Investment. Lee first cut his investing teeth on The Motley Fool bulletin boards (commonly referred to as the “Fool Boards,”) and he’s infinitely grateful to all of the investors he learned from in this powerful investing community.TMFSaintGermainX@LeeSamahaStocks MentionedPTCNASDAQ: PTC$154.40 (0.71%) $1.10NvidiaNASDAQ: NVDA$187.77 (0.11%) $0.21*Average returns of all recommendations since inception. Cost basis and return based on previous market day close.