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Chicago, IL – July 24, 2026 – Today Zacks Equity Research discusses Unity Software U, HubSpot HUBS and GitLab GTLB.
Industry: Internet software
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The Zacks Internet Software industry faces significant implementation challenges as AI adoption accelerates. One of the biggest concerns is balancing rapid software development with governance and security. Monetizing AI also poses challenges. Macroeconomic conditions continue to weigh on software spending.
Industry participants face the challenge of continually investing in AI infrastructure while maintaining profitability. To remain competitive, these players are investing significant resources in AI models, cloud infrastructure, technical talent and platform modernization. However, industry players like Unity software, HubSpot And GitLab benefit from the rapid adoption of AI, which leads to an expansion of software use. AI drives stronger platform engagement, broader enterprise adoption and new monetization opportunities.
Industry description
The Zacks Internet Software industry includes companies that provide application performance monitoring, infrastructure and application software, DevOps delivery, and security software. Industry participants provide online payment solutions, asset optimization software, multi-cloud application security and delivery, social networking, 3D printing applications and cloud content management solutions. They leverage the SaaS-based cloud computing model to provide solutions to end users and businesses.
Therefore, subscription is the main source of income. Advertising is also an important source of income. Industry participants target a variety of end markets, including banking and financial services, construction, consumer products, education, energy, legal, various service providers, federal government, and technology and animal health services.
3 trends shaping the future of the Internet software industry
Rapid growth in enterprise software infrastructure: The industry is benefiting from rapid AI adoption, which is driving demand for enterprise software infrastructure. AI-generated code is driving a sharp increase in code pushes and platform usage, creating structural demand for DevSecOps platforms that can manage security, governance, and deployment at the machine level. The growing need for integrated platforms capable of orchestrating both human developers and AI agents while maintaining compliance and operational control benefits the industry’s prospects. Platform consolidation is becoming increasingly attractive as companies seek a unified data and AI infrastructure.
Consumption-based pricing is becoming increasingly important: The emergence of AI-native pricing models is a key catalyst. Industry players are moving beyond traditional seat-based licensing to introduce usage-based credits and outcome-based pricing. The companies enable their customers to scale usage as AI adoption increases, opening up new monetization channels beyond traditional software subscriptions. AI-powered agents, automation, and usage-based pricing create additional revenue streams while increasing customer productivity.
AI agents and AI workloads create opportunities: The growing need to secure cloud platforms amid increasing frequency of cyberattacks and hacking is driving the demand for web-based cybersecurity software. As organizations continue to move their on-premises workloads to cloud environments, application and infrastructure monitoring becomes increasingly important. This increases the demand for web-based performance management monitoring tools. AI applications, AI agents, and cloud-based AI workloads are expanding the attack surface for enterprises, which bodes well for industry participants.
The Zacks Industry Rank suggests a poor outlook
The Zacks Internet Software industry, which is part of the broader Zacks Computer and Technology sector, has a Zacks Industry Rank #152, placing it in the bottom 38% of more than 247 Zacks industries.
The group’s Zacks Industry Rank, which is the average of the Zacks Rank of all member stocks, suggests a bleak near-term outlook. Our research shows that the top 50% of the Zacks-ranked industries outperform the bottom 50% by a factor of more than two to one.
The industry’s position in the bottom 50% of Zacks-ranked industries is the result of a negative earnings outlook for the companies involved overall. A look at the overall earnings estimate revisions shows that analysts are pessimistic about this group’s earnings growth potential. The industry’s 2026 earnings estimates have moved 1.7% lower since August 31, 2025.
Given the industry’s pessimistic outlook, there are few stocks worth picking for healthy portfolio returns. However, before we introduce the industry’s top picks, it’s worth first taking a look at the industry’s shareholder returns and current valuation.
The industry lags the S&P 500 and the sector
The Zacks Internet Software industry has underperformed the broader Zacks Computer and Technology sector and the S&P 500 Index over the past year.
The industry has fallen 14.8% in that period, compared to the S&P 500’s 20.8% rise and the broader sector’s 29.9% appreciation.
Current industry rating
Based on the forward 12-month price-to-sales (P/S) ratio, a commonly used multiple to value Internet software stocks, we see that the industry is currently trading at 3.96x, compared to the S&P 500’s 4.97x and the sector’s forward 12-month P/E ratio of 6.71.
Over the last five years, the industry has traded at a high of 6.12X and a low of 3.69X, with a median of 4.73X.
3 Internet Software Stocks to Buy Now
Unity software: This Zacks Rank #1 (Strong Buy) stock is benefiting from the rapid adoption of AI in game development and interactive content creation. You can see the complete list of today’s Zacks #1 Rank stocks here.
AI accelerates game production, increases new developer signups, and increases demand for game discovery and monetization tools. The company is capitalizing on these trends through Vector, its AI-powered personalization platform, Unity AI for content creation and upcoming commerce platform, while AI-native pricing models tied to agent usage are expected to create additional long-term revenue opportunities.
Unity shares are down 33.7% year-to-date (YTD). The Zacks Consensus Estimate for 2026 earnings has risen a penny over the past 30 days to $1.04 per share.
HubSpot: HubSpot is another Zacks Rank #1 company. HubSpot’s growth prospects are supported by increasing enterprise adoption, platform consolidation, and increasing AI monetization. The company continues to benefit from high-value customer acquisition, multi-hub adoption and pricing initiatives, while AI-powered offerings such as Customer Agent, Prospecting Agent and Data Agent drive higher credit consumption and expand recurring revenue opportunities.
The company believes that combining unified customer data with AI agents positions HubSpot as a comprehensive growth platform, enabling customers to automate marketing, sales and service workflows while increasing platform adoption over time.
HUBS shares have fallen 48.9% since the beginning of the year. The Zacks Consensus Estimate for 2026 earnings is $13.11 per share, down a penny over the past 30 days.
GitLab: This Zacks Rank #1 company is well-positioned to benefit from the structural shift towards AI-powered software development. GitLab wins larger enterprise contracts as customers consolidate DevSecOps workflows on a single platform with integrated security, compliance and AI. GitLab Ultimate anchors the upsell movement, while Dedicated and the Duo Agent Platform expand deployment and monetization options.
GitLab’s fiscal 2027 guidance suggests continued revenue growth with non-GAAP operating profitability, supported by strong cash generation and ongoing share repurchases. Remaining performance obligations of nearly $1.1 billion provide revenue visibility for contract renewals and expansions. Rising SaaS activity and early credit consumption suggest that AI-powered development is increasing usage across the GitLab lifecycle.
GitLab shares are down 16.4% year-to-date. The Zacks Consensus Estimate for GTLB’s fiscal 2027 earnings is 81 cents per share, remaining unchanged over the past 30 days.
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