Software stocks have benefited from the ongoing digitalization wave, along with strong adoption of Artificial Intelligence (AI), Generative AI (GenAI) and Agentic AI. The growing proliferation of software-as-a-service (SaaS), the rapid migration to cloud platforms, the increasing demand for solutions that support a hybrid/flexible working model and the rising user penetration of online payment solutions are likely to remain major support for software companies like KernWeef (CRV – Free report), BILL Holdings (BILL – Free report), Confirm holdings (AFRM – Free report) and Unity software (YOU – Free report).
Factors that favor software stocks
The growing proliferation of AI-powered voice recognition, telemedicine, learning management, infrastructure monitoring and business expense management software is expected to benefit industry players in the quarter under review. Enterprise workspace solutions, business communications platforms and online education portals are also likely to continue to contribute.
The spike in adoption of cloud-based services, increasing proliferation of IoT and AR/VR devices, and accelerated deployment of 5G are expected to have boosted the performance of software stocks this earnings season. Strong momentum in enterprise collaboration software, remote desktop tools, natural language processing and time tracking tools could have greatly benefited the software industry this earnings season.
Increasing cyber attacks, including Distributed Denial of Service attacks and attacks using malware via the Transport Layer Security and Secure Sockets Layer protocols, are redefining the cyber threat landscape. Companies are spending more on cloud-based security solutions. Furthermore, the software-defined approach is increasingly preferred over older hardware-centric models due to the need for flexibility.
The increasing customer-centric approach allows end users to perform all required actions with minimal intervention from software vendors. The pay-as-you-go model helps Internet software providers tailor their offerings to the needs of different users. The subscription-based business model provides recurring revenue for industry participants. The affordability of the SaaS delivery model, especially for small and medium-sized businesses, is another key driver.
How do you make the right choice?
The presence of diverse industry participants can make it difficult to find the right software stocks that can beat earnings. However, our proprietary methodology makes this task simple.
You can narrow your choices by looking for stocks that have the perfect combination of two key elements: a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy), or 3 (Hold).
Earnings ESP is our proprietary methodology for determining stocks that have the maximum chance of beating estimates on their next earnings announcement. It is the percentage difference between the most accurate estimate and the Zacks Consensus Estimate. Our Earnings ESP filter can help you discover the best stocks to buy or sell before they are reported.
Our research shows that for stocks with this favorable mix of ingredients, the chance of a positive earnings surprise is as much as 70%.
Top Bets
KernWeef will report third quarter 2025 results on November 10. The company currently carries a Zacks Rank #2 and has an Earnings ESP of +15.66%. You can see it The complete list of today’s Zacks #1 Rank stocks can be found here.
For the third quarter, CRWV expects revenue in the range of $1.26 billion to $1.3 billion, while the Zacks Consensus Estimate is pegged at $1.28 billion. The consensus earnings figure is a loss of 39 cents per share.
Increasing demand for CoreWeave’s cloud software and infrastructure services, amid rising AI infrastructure spending, is likely to have driven the top performance in the third quarter. In the last reported quarter, CRWV’s revenues rose 207% year over year, ending the quarter with a backlog of $30.1 billion.
CoreWeave’s meteoric rise is driven by its ability to capitalize on the generative AI boom. The adoption of AI in enterprises is accelerating, driven by its strategic necessity. CoreWeave is seen as a force multiplier, enabling this innovation and growth for both training and inference workloads. The company’s continued focus on scaling capacity and improving service delivers strong momentum against a market backdrop of limited supply and better-than-expected sales performance.
BILL Holdings is expected to announce first-quarter fiscal 2026 results on November 6. The company carries a Zacks Rank #2 and has an Earnings ESP of +0.85%. The Zacks Consensus Estimate for first-quarter revenue is pegged at $390.6 million, which calls for a year-over-year increase of approximately 9%. The consensus earnings figure is 51 cents per share, down 19.1% from earnings of 63 cents in the same quarter last year.
BILL benefits from a growing customer base of small and medium-sized businesses (SMEs) and a diversified business model. BILL uses AI to make its solutions more user-friendly, automated and predictive. The company is also working on integrating generative AI into its solutions to improve customer experience.
The company highlighted its leadership in automating financial operations for SMBs with innovations such as built-in 1099 functionality and advanced payment solutions. BILL’s strong balance sheet and ability to generate free cash flows remain notable.
Confirm holdings is expected to report first-quarter fiscal 2026 results on November 6. The company currently carries a Zacks Rank #3 and has an Earnings ESP of +3.53%. The Zacks Consensus Estimate for first-quarter revenue is pegged at $885 million, indicating year-over-year growth of 26.7%. The consensus for the result is earnings per share (EPS) of 11 cents per share, suggesting a strong improvement from the previous quarter’s loss of 31 cents.
Affirm has delivered strong revenue growth in recent quarters through several revenue streams, including merchant network fees, loan interest and virtual card revenue. The growing number of active merchants, improvement in gross merchandise value (GMV) and average loan balances drive merchant network revenue and interest income. The trend is likely to have continued into the coming quarter.
Key partnerships, such as those with Apple Pay, Worldpay, Fiserv, Wayfair and Hotels.com, play a crucial role in its expansion. Additionally, Affirm Holdings is aggressively expanding beyond U.S. borders, leveraging its partnerships. The company has already entered the UK market and is now preparing to expand into Western Europe. It also plans to relaunch in Australia. With access to more than 377,000 merchants, these expansions could open lucrative new growth corridors.
Unity software will announce third quarter 2025 results on November 5. The company currently has an Earnings ESP of +3.03% and a Zacks Rank #3. The Zacks Consensus Estimate for revenues of $447.6 million suggests year-over-year growth of 0.2%. The consensus operating profit figure is set at earnings per share (EPS) of 17 cents, indicating a robust improvement from last year’s quarterly loss of 31 cents per share.
Unity Software’s third-quarter revenue was likely pressured by a number of key factors. While the rollout of the AI-powered Unity Vector platform was a strategic success, its positive financial impact may not have been fully realized within the quarter. At the same time, the company expects a decline in revenue from certain legacy advertising products as resources are increasingly shifted to Vector. This internal product mix transition has created revenue friction in the short term, offsetting some of the initial gains from Vector’s stronger performance.
However, management expected a stronger trajectory in the third quarter for several reasons. Stabilization returns to non-network advertising products, supported by product upgrades and AI integration. The Unity Ad Network now represents about half of ad revenue, and its faster growth is contributing to greater weight in the overall results. Vector continues to deliver more value, with user acquisition quality and volume improving by more than 15% sequentially in the second quarter. Collectively, these factors are expected to have supported mid-single-digit growth in the advertising segment for the third quarter.
