Software stocks are entering this earnings season from a position of strength. Companies continue to invest heavily in digital transformation as artificial intelligence (AI) evolves from an experimental technology to a core business tool. Companies are increasingly seeing tangible benefits from generative AI and the emerging wave of agentic AI. At the same time, Software-as-a-Service (SaaS), cloud computing, hybrid working and digital payment solutions remain strong long-term growth drivers.
This favorable environment suggests that software companies with strong execution and AI commitment could once again exceed analysts’ expectations. Against this attitude Unity software You, HubSpot HUBS, Arista Networks ANET and block XYZ is characterized by companies that have the potential to grow profits.
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What are the advantages of software stocks?
The current earnings season is expected to highlight the continued strength of AI-driven software spending. Companies are increasingly turning to solutions such as speech recognition, telehealth platforms, learning management systems, infrastructure monitoring software and spend management tools. Collaboration platforms, communication software and online education services are also seeing steady demand as workplaces and learning environments continue to evolve.
Cloud adoption remains one of the industry’s biggest growth drivers. The rapid proliferation of IoT devices, augmented and virtual reality applications, and the introduction of 5G networks are driving greater demand for cloud-based software. At the same time, companies continue to invest in collaboration platforms, remote desktop solutions, natural language processing tools and productivity software, supporting healthy industry-wide growth.
Cybersecurity is another big tailwind. As cyberattacks become more common and sophisticated, companies are allocating larger budgets to cloud-native security solutions. Companies are also replacing traditional, hardware-heavy infrastructures with software-defined systems that offer greater flexibility, scalability and lower operating costs.
Another positive trend is the industry’s shift towards customer-focused software platforms. Modern software solutions require less manual support from vendors while giving customers greater control over their operations. Flexible pay-as-you-go pricing allows companies to scale usage as needed, while subscription-based business models generate predictable recurring revenue for software providers. SaaS platforms remain affordable for small and medium-sized businesses, expanding the industry’s addressable market.
How do you identify potential outperformers?
With multiple industry participants present, it can be daunting to find the right software stocks that have the potential to outperform earnings. However, our proprietary methodology makes this task easy.
You could narrow down your choices by looking at 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 identifying stocks that have the best chance of beating estimates on their next earnings release. It is the percentage difference between the Most Accurate Estimate and the Zacks Consensus Estimate. Use our Earnings ESP filter to discover the best stocks to buy or sell before they’re reported.
Our research shows that the probability of a positive earnings surprise for stocks with this favorable mix of ingredients is up to 70%.
Top picks
Unity software will report second quarter 2026 results on August 6. The company carries a Zacks Rank #1 and has an Earnings ESP of +2.74%. You can see You can see the complete list of today’s Zacks #1 Rank stocks here.
The Zacks Consensus Estimate for second-quarter revenue is $510.9 million, up 15.9% year-over-year. The consensus mark for earnings is 24 cents per share, indicating a significant improvement from the year-ago quarter’s loss per share of 26 cents.
Unity’s turnaround story is gaining credibility. The company transformed its business by exiting lower-quality businesses and focusing on higher-margin recurring revenue opportunities. Although these portfolio changes have resulted in short-term sales fluctuations, they improve the overall quality and sustainability of the company.
Management is placing greater emphasis on scalable advertising technology, YouTuber subscriptions and monetization services, all of which should drive higher long-term recurring revenue. This strategy also strengthens Unity’s competitive position against companies like AppLovin by combining advanced advertising technology with its leading game development platform.
The company’s product ecosystem continues to create new monetization opportunities for developers. The Create segment benefits from good subscription demand and increasing usage-based revenue. Another important catalyst is Unity AI, which entered public beta in May 2026. By helping developers automate coding, asset creation, and other development tasks, the platform has the potential to significantly improve productivity and strengthen customer loyalty over time.
Unity Software Inc. Price and EPS Surprise
Unity Software Inc. Price and EPS Surprise
Unity Software Inc. Price EPS Surprise | Quote from Unity Software Inc
HubSpot is expected to report second-quarter 2026 results on August 5. The company currently has an ESP of +0.15% and a Zacks Rank #1. The Zacks Consensus Estimate for revenue of $897.8 million suggests annual growth of 18%. The consensus bottom line is $3.02 per share, indicating a strong year-over-year increase of 37.9%.
HubSpot continues to strengthen its competitive position by embedding AI across its customer platform. Features like AI Assistants, AI Agents, AI Insights, and ChatSpot help customers automate marketing, sales, and customer relationship management tasks without paying additional fees. This comprehensive AI integration increases the value of the platform and improves customer loyalty.
The company’s move to a seat-based pricing model is another key growth driver. The new pricing structure makes it easier for customers to use HubSpot’s services while reducing price conflicts as companies expand usage. Over time, this should lead to healthier customer relationships and support stronger recurring revenue growth.
HubSpot is also integrating generative AI more deeply into its CRM, marketing and sales automation tools. Meanwhile, the app marketplace continues to make it easier for customers to connect to third-party applications, adding value to the platform and increasing switching costs for users.
HubSpot, Inc. Price and EPS Surprise
HubSpot, Inc. Price and EPS Surprise
HubSpot, Inc. Price EPS Surprise | HubSpot, Inc. Quote
Arista Networks is expected to report second quarter 2026 results on August 4. The company has a Zacks Rank #2 and an Earnings ESP of +0.84%. The Zacks Consensus Estimate for second-quarter revenue is $2.83 billion, up 28.5% year-over-year. The consensus mark for earnings is 89 cents per share, up 21.9% from a year ago.
Arista remains one of the strongest networking companies benefiting from the AI ​​infrastructure boom. Its broad portfolio of high-performance Ethernet switches and routers is well positioned for modern data centers that require high capacity, low latency and excellent power efficiency.
The company continues to be a leader in high-speed networking solutions, particularly 100 Gigabit Ethernet switches, while steadily expanding its presence in 200G and 400G products. As AI and machine learning workloads become more demanding, enterprises and hyperscale cloud providers increasingly rely on Arista’s networking solutions.
The Arista 2.0 strategy also delivers results. Customers adopt the unified network platform as they modernize data centers and move to cloud-native infrastructure. The continued expansion of CloudEOS Edge and the broader software portfolio further strengthens Arista’s position in the data center, campus network and wide area network markets and supports healthy long-term revenue growth.
Arista Networks, Inc. Price and EPS Surprise
Arista Networks, Inc. Price and EPS Surprise
Arista Networks, Inc. Price EPS Surprise | Quote from Arista Networks, Inc
block is expected to report second-quarter 2026 results on August 5. The company currently has a Zacks Rank #2 and an Earnings ESP of +0.23%. The Zacks Consensus Estimate for second-quarter revenue is $6.54 billion, up 8% year-over-year. The consensus mark for earnings is 86 cents per share, up 38.7% from the year-ago quarter’s profit of 62 cents.
Block continues to build a powerful financial ecosystem that serves both merchants and consumers. Its integrated platform allows businesses to manage payments, financial services and marketing through a single provider, giving them a competitive advantage and increasing customer loyalty.
The combination of Square and Cash App allows Block to participate in multiple phases of the payments ecosystem rather than relying solely on transaction volume. By increasing user engagement and monetization on both platforms, the company creates additional revenue opportunities while strengthening its competitive position.
Block is also expanding through technological innovations and strategic partnerships. Collaborations with companies such as Birch Coffee, GOLFTEC and Steak Escape show the growing acceptance of its trading platform in various industries. As more companies join its ecosystem, Block appears well-positioned to maintain healthy growth and potentially exceed earnings expectations.
Block, Inc. Price and EPS Surprise
Block, Inc. Price and EPS Surprise
Block, Inc. Price EPS Surprise | Offered by Block, Inc
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This article was originally published on Zacks Investment Research (zacks.com).
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