Software stocks are entering this earnings season with strong momentum, backed by steady demand and clear long-term drivers. Digital transformation remains a priority for businesses, while artificial intelligence (AI) is now becoming a core part of operations rather than just a testing ground. Generative AI and agentic AI are starting to show real returns. Alongside this, software-as-a-service (SaaS) models, cloud migration, hybrid work trends and digital payments continue to support growth. Given this backdrop, Block Inc. XYZ, Bill Holdings Inc. BILL, AudioEye Inc. AEYE and HubSpot Inc. HUBS appear well-positioned to deliver strong earnings surprises.
What’s Going in Favor of Software Stocks?
The quarterly results during this earnings cycle are likely to see solid demand across several AI-led software categories. Applications such as voice recognition, telehealth platforms, learning management systems, infrastructure monitoring tools and spend management software are becoming essential for businesses. Enterprise collaboration tools, communication platforms and online learning services also remain in steady demand, reflecting how work and education continue to evolve.
Cloud adoption is still a major growth pillar. The rising use of IoT devices, AR/VR technologies and the ongoing rollout of 5G networks are expanding the need for software solutions. Demand for collaboration platforms, remote desktop tools, natural language processing and productivity tracking software is likely to have stayed strong, supporting overall industry performance.
Cybersecurity trends are adding another layer of growth. As cyber threats become more complex, companies are increasing investments in cloud-based security solutions. There is also a clear shift toward software-defined systems, which are more flexible and easier to scale than traditional hardware-based setups.
The increasing customer-centric approach is allowing end-users to perform all required actions with minimal intervention from software providers. The pay-as-you-go model helps Internet Software providers scale their offerings to the needs of different users. The subscription-based business model ensures recurring revenues for the industry participants. The affordability of the SaaS delivery model, particularly for small and medium-sized businesses, is another major driver.
How to Identify Potential Outperformers?
With the presence of several industry participants, finding the right software stocks with the potential to beat on earnings can be daunting. However, our proprietary methodology makes this task simple.
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 determining stocks that have the maximum chances of beating estimates in their next earnings announcement. It is the percentage difference between the Most Accurate Estimate and the Zacks Consensus Estimate. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.
Our research shows that for stocks with this favorable mix of ingredients, the odds of a positive earnings surprise are as high as 70%.
Top Bets
Block is scheduled to report first-quarter 2025 results on May 7. The company currently sports a Zacks Rank #1 and has an Earnings ESP of +3.51%. You can see the complete list of today’s Zacks #1 Rank stocks here.
The Zacks Consensus Estimate for first-quarter revenues is pegged at $6.19 billion, which calls for a year-over-year increase of 7.2%. The consensus mark for earnings stands at 68 cents per share, indicating a rise of 21.4% from the year-ago quarter’s earnings of 56 cents.
Block offers financial and marketing services through its commerce ecosystem that helps sellers to start, run and grow their businesses. The company is benefiting from its vertically integrated ecosystem spanning sellers and consumers, allowing it to control both sides of the transaction.
The combination of Square and Cash App enables Block to capture more value across the payment journey, with a focus on increasing engagement and monetization within its user base rather than relying solely on transaction scale. Integration of new technologies and solutions to fuel growth is encouraging. Strategic partnerships with firms such as Birch Coffee, GOLFTEC and Steak Escape further highlight the company’s growing influence and market reach.
Block, Inc. Price and EPS Surprise
Block, Inc. price-eps-surprise | Block, Inc. Quote
AudioEye is anticipated to report first-quarter 2026 results on May 5. The company carries a Zacks Rank #2 and has an Earnings ESP of +5.88%. The Zacks Consensus Estimate for first-quarter revenues is pegged at $10.54 million, which calls for a year-over-year increase of 8.4%. The consensus mark for earnings stands at 17 cents per share, indicating growth of 13.3% from the year-ago quarter’s earnings of 15 cents.
AudioEye is a leading digital accessibility platform that uses a hybrid approach of AI-powered automation and human expertise to make websites compliant with Web Content Accessibility Guidelines (WCAG) standards. It automatically fixes approximately 50% of common accessibility issues in real time, provides 24/7 monitoring and offers expert manual services to ensure legal compliance.
AudioEye is benefiting from rising legal and regulatory complexity, the expansion of the European Accessibility Act and stringent U.S. DOJ Title II regulations, which are driving record compliance demand. Shifting its business model from non-recurring revenues to annual recurring revenues is likely to enhance its profitability over the long run.
Audioeye, Inc. Price and EPS Surprise
Audioeye, Inc. price-eps-surprise | Audioeye, Inc. Quote
Bill Holdings is expected to report third-quarter fiscal 2026 results on May 14. The company carries a Zacks Rank #2 and has an Earnings ESP of +1.62%. The Zacks Consensus Estimate for second-quarter revenues is pegged at $403.1 million, which calls for a year-over-year increase of 12.5%. The consensus mark for earnings stands at 54 cents per share, indicating a year-over-year rise of 8%.
BILL is benefiting from an expanding small and medium businesses (SMBs) clientele and a diversified business model. Bill Holdings is leveraging AI to make its solutions easier to use, more automated and predictive. It is also working on integrating generative AI into its solutions to enhance customer experience.
The company emphasized its leadership in automating financial operations for SMBs with innovations like BILL Cash Account, Supplier Payments Plus and BILL W-9 Agent solutions. Bill Holdings’ strong balance sheet and free cash flow-generating ability remain noteworthy.
BILL Holdings, Inc. Price and EPS Surprise
BILL Holdings, Inc. price-eps-surprise | BILL Holdings, Inc. Quote
HubSpot is expected to report first-quarter 2026 results on May 14. The company currently has an Earnings ESP of +0.78% and a Zacks Rank #3. The Zacks Consensus Estimate for revenues of $866.7 million indicates year-over-year growth of 21.4%. The consensus mark for the bottom line is pegged at $2.44 per share, suggesting robust year-over-year growth of 37.1%.
HubSpot's AI, which includes cutting-edge features such as AI assistance, AI agents, AI insights, and ChatSpot, is driving more value to customers. HubSpot has integrated HubSpot AI across its entire product suites and customer platform, enabling users to leverage AI features at no additional cost. Pricing optimization and the transition to a seat pricing model are expected to continue driving customer growth.
The company is embedding generative AI into its customer relationship management, marketing and sales automation tools. The buyout of Frame AI, an AI-powered conversation intelligence platform, has enabled HUBS to unify structured and unstructured data to transform conversations into actionable intelligence. HubSpot's App Marketplace offers a customer-centric solution by making it simple for companies to find and seamlessly connect the integrations to grow their businesses.
HubSpot, Inc. Price and EPS Surprise
HubSpot, Inc. price-eps-surprise | HubSpot, Inc. Quote
Zacks' Research Chief Names "Stock Most Likely to Double"
Our team of experts has just released the 5 stocks with the greatest probability of gaining +100% or more in the coming months. Of those 5, Director of Research Sheraz Mian highlights the one stock set to climb highest.
This top pick is a little-known satellite-based communications firm. Space is projected to become a trillion dollar industry, and this company's customer base is growing fast. Analysts have forecasted a major revenue breakout in 2025. Of course, all our elite picks aren't winners but this one could far surpass earlier Zacks' Stocks Set to Double like Hims & Hers Health, which shot up +209%.
Free: See Our Top Stock And 4 Runners UpHubSpot, Inc. (HUBS) : Free Stock Analysis Report
Audioeye, Inc. (AEYE) : Free Stock Analysis Report
BILL Holdings, Inc. (BILL) : Free Stock Analysis Report
Block, Inc. (XYZ) : Free Stock Analysis Report
This article originally published on Zacks Investment Research (zacks.com).
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
