Software stocks are heading into this earnings season from a position of strength. Businesses continue to invest heavily in digital transformation, while artificial intelligence (AI) is shifting 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 work and digital payment solutions remain powerful long-term growth drivers.
This favorable backdrop suggests that software companies with strong execution and AI exposure could once again outperform analysts’ expectations. Against this setting, Unity Software U, HubSpot HUBS, Arista Networks ANET and Block XYZ stand out as companies with the potential to deliver earnings beats.
What’s Going in Favor of Software Stocks?
The current earnings season is expected to highlight the continued strength of AI-driven software spending. Businesses are increasingly adopting solutions such as voice 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 engines. The rapid expansion of IoT devices, augmented and virtual reality applications, and the rollout of 5G networks are creating greater demand for cloud-based software. At the same time, businesses continue investing in collaboration platforms, remote desktop solutions, natural language processing tools and productivity software, supporting healthy industry-wide growth.
Cybersecurity is another major tailwind. As cyberattacks become more frequent and sophisticated, companies are allocating larger budgets toward cloud-native security solutions. Businesses are also replacing traditional hardware-heavy infrastructure with software-defined systems that offer greater flexibility, scalability and lower operating costs.
Another positive trend is the industry's shift toward customer-centric 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 revenues for software providers. SaaS platforms also remain affordable for small and medium-sized businesses, expanding the industry's addressable market.
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 Picks
Unity Software will report second-quarter 2026 results on Aug. 6. The company sports a Zacks Rank #1 and has an Earnings ESP of +2.74%. You can see the complete list of today’s Zacks #1 Rank stocks here.
The Zacks Consensus Estimate for second-quarter revenues is pegged at $510.9 million, which calls for a year-over-year increase of 15.9%. The consensus mark for earnings stands at 24 cents per share, indicating a robust improvement from the year-ago quarter’s loss per share of 26 cents.
Unity's turnaround story is gaining credibility. The company has been reshaping its business by exiting lower-quality operations and focusing on higher-margin, recurring revenue opportunities. Although these portfolio changes have created short-term revenue fluctuations, they are improving the overall quality and sustainability of the business.
Management is placing greater emphasis on scalable advertising technology, creator subscriptions and monetization services, all of which should support stronger long-term recurring revenues. 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 is benefiting from healthy subscription demand and increasing usage-based revenues. 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 engagement over time.
Unity Software Inc. Price and EPS Surprise
Unity Software Inc. price-eps-surprise | Unity Software Inc. Quote
HubSpot is expected to report second-quarter 2026 results on Aug. 5. The company currently has an Earnings ESP of +0.15% and a Zacks Rank #1. The Zacks Consensus Estimate for revenues of $897.8 million indicates year-over-year growth of 18%. The consensus mark for the bottom line is pegged at $3.02 per share, suggesting a robust year-over-year jump of 37.9%.
HubSpot continues to strengthen its competitive position by embedding AI across its entire customer platform. Features such as AI assistants, AI agents, AI insights and ChatSpot are helping customers automate marketing, sales and customer relationship management tasks without paying additional fees. This broad AI integration enhances the value of the platform and improves customer retention.
The company's shift to a seat-based pricing model is another important growth driver. The new pricing structure makes it easier for customers to adopt HubSpot's services while reducing pricing friction when businesses expand usage. Over time, this should create healthier customer relationships and support stronger recurring revenue growth.
HubSpot is also integrating generative AI deeper into its CRM, marketing and sales automation tools. Meanwhile, its App Marketplace continues to make it easier for customers to connect third-party applications, making the platform more valuable and increasing switching costs for users.
HubSpot, Inc. Price and EPS Surprise
HubSpot, Inc. price-eps-surprise | HubSpot, Inc. Quote
Arista Networks is slated to report second-quarter 2026 results on Aug. 4. The company carries a Zacks Rank #2 and has an Earnings ESP of +0.84%. The Zacks Consensus Estimate for second-quarter revenues is pegged at $2.83 billion, which calls for a year-over-year increase of 28.5%. The consensus mark for earnings stands at 89 cents per share, indicating a year-over-year rise of 21.9%.
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 superior power efficiency.
The company continues to lead in high-speed networking solutions, particularly in 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 are increasingly relying on Arista's networking solutions.
Its Arista 2.0 strategy is also delivering results. Customers are adopting its unified networking platform as they modernize data centers and transition toward cloud-native infrastructure. Continuous expansion of CloudEOS Edge and the broader software portfolio further strengthens Arista's position across data center, campus networking and wide-area networking markets, supporting healthy long-term revenue growth.
Arista Networks, Inc. Price and EPS Surprise
Arista Networks, Inc. price-eps-surprise | Arista Networks, Inc. Quote
Block is scheduled to report second-quarter 2026 results on Aug. 5. The company currently carries a Zacks Rank #2 and has an Earnings ESP of +0.23%. The Zacks Consensus Estimate for second-quarter revenues is pegged at $6.54 billion, which calls for a year-over-year increase of 8%. The consensus mark for earnings stands at 86 cents per share, indicating a rise of 38.7% from the year-ago quarter’s earnings of 62 cents.
Block continues to build a powerful financial ecosystem serving both merchants and consumers. Its integrated platform enables businesses to manage payments, financial services and marketing from a single provider, creating a competitive advantage and increasing customer loyalty.
The combination of Square and Cash App allows Block to participate in multiple stages of the payment ecosystem rather than depending solely on transaction volumes. By increasing user engagement and monetization across both platforms, the company is creating additional revenue opportunities while strengthening its competitive position.
Block is also expanding through technology innovation and strategic partnerships. Collaborations with companies such as Birch Coffee, GOLFTEC and Steak Escape demonstrate the growing adoption of its commerce platform across multiple industries. As more businesses join its ecosystem, Block appears well-positioned to sustain healthy growth and potentially outperform earnings expectations.
Block, Inc. Price and EPS Surprise
Block, Inc. price-eps-surprise | Block, Inc. Quote
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This article originally published on Zacks Investment Research (zacks.com).