Industry Description
The Zacks Communication-Network Software industry comprises companies that provide software solutions supporting cloud, on-premise and hybrid environments, communication technology solutions, including broadband and Voice Over Internet Protocol, digital communication services delivered as software-as-a-service and telecom solutions, supporting the proliferation and the deployment of 5G and 6G networks, drone technology and protective communications software. There are a few companies that offer solutions based on the Open Radio Access Network standard. Others offer wireless connectivity solutions for mission-critical Industrial Internet applications and services. Solutions from these companies support a variety of industries, including telecommunications, technology, industrial, government, retail, financial, gaming and education.
3 Trends Shaping the Future of the Communication-Network Software Industry
Increased Adoption of Cloud-based Solutions: Rapid digitalization, driven by the disruption caused by the pandemic, has increased the demand for cloud-based applications, virtualized software and container-based software. Applications are being developed in the cloud, which is creating opportunities and, at the same time, challenges for industry participants in terms of performance and security. Rising cyberattacks, including Distributed Denial of Service attacks and attacks using malware through Transport Layer Security and Secure Sockets Layer protocols, are redefining the cyber threat landscape. Enterprises are spending more on cloud-based security solutions. Moreover, the software-defined approach is increasingly preferred over legacy hardware-centric models due to the need for agility.
Growing Importance of Automation Tools: The ongoing rapid transition to the cloud has increased the importance of automation tools. Enterprises are adopting automated tools to deploy and operate security and application services. This is improving performance monitoring and detection, reporting security anomalies and reducing overall costs.
Rapid Evolution of 5G and 6G Networks: Industry participants are benefiting from a continued rise in demand for data-intensive bandwidth and the need for reduced latency associated with smartphones, tablets and machine-to-machine communication. The proliferation of data centers, big data, cloud-based services, streaming media content and IoT are key catalysts. The rapid deployment of 5G networks is creating a massive growth opportunity for telecom providers who are using solutions provided by industry participants.
Zacks Industry Rank Indicates Bright Prospects
The Zacks Communication-Network Software industry is housed within the broader Zacks Computer and Technology sector. It carries a Zacks Industry Rank #23, which places it in the top 9% of more than 250 Zacks industries.
The group’s Zacks Industry Rank, which is the average of the Zacks Rank of all the member stocks, indicates bullish near-term prospects. 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 positioning in the top 50% of the Zacks-ranked industries is a result of the positive earnings outlook for the constituent companies in aggregate. Looking at the aggregate earnings estimate revisions, it appears that analysts are optimistic about this group’s earnings growth potential. Since Feb. 28, 2026, the industry’s earnings estimates for the current year have moved 35.7% north.
Given the bright prospects, there are a number of stocks worth watching in this prospering industry. But, before we present these stocks, it is worth looking at the industry’s shareholder returns and current valuation first.
Industry Beat Sector and S&P 500
The Zacks Communication-Network Software industry has outperformed the Zacks S&P 500 composite and its sector in the past year.
The industry has returned 61.6% over this period compared with the Zacks Computer and Technology sector’s return of 50.5% and the S&P 500’s appreciation of 31.6%.
One-Year Price Performance
Industry's Current Valuation
On the basis of forward 12-month P/S, a commonly used multiple for valuing network software companies, we see that the industry is currently trading at 0.87X compared with the S&P 500’s 5.25X and the sector’s 6.79X.
Over the past five years, the industry has traded as high as 1.21X and as low as 0.27X, with the median being 0.51X, as the charts below show.
Price/Sales Ratio (F12M)
2 Stocks to Watch Right Now
Vistance Networks: This Zacks Rank #1 (Strong Buy) company is a global provider of intelligent network solutions for access networks and enterprise networks. You can see the complete list of today’s Zacks #1 Rank stocks here.
Vistance’s Aurora is benefiting from the DOCSIS 4.0 upgrade cycle and expanding deployments, while RUCKUS is seeing Wi-Fi 7-driven demand, improving operating leverage and rising subscription mix.
Shares of Vistance have dropped 36.1% year to date. The Zacks Consensus Estimate for VISN’s 2026 earnings has increased 25.8% to $1.22 per share over the past 30 days.
Price and Consensus: VISN
Ribbon Communications: This Zacks Rank #3 (Hold) company is expected to benefit from improving bookings, backlog conversion, and exposure to network modernization. Verizon and other service-provider voice modernization projects are expected to accelerate in 2H26, providing a boost to Ribbon. Moreover, continued strength in India, enterprise and government demand, and growth in data center interconnect, critical infrastructure, cloud-native SBC, AWS deployments, and Acumen AI Ops bode well for Ribbon’s prospects.
Shares of Ribbon have declined 10.8% year to date. The Zacks Consensus Estimate for RBBN’s 2026 has increased by a penny to 41 cents per share over the past 30 days.
Price and Consensus: RBBN
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Vistance Networks, Inc. (VISN): Free Stock Analysis Report
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This article originally published on Zacks Investment Research (zacks.com).