Published on 29 Apr 2024 on Zacks via Yahoo Finance

What's in Store for These 4 Software Stocks This Earnings Season?

Software stocks’ quarterly performances are expected to have significantly benefited from an uptick in the demand for software-based services and products, owing to the increasing adoption of the hybrid work model.The growing proliferation of Software-as-a-Service or SaaS-based services, the rapid migration to cloud platforms, the solid adoption of video-conferencing software, and rising user penetration of online or digital payment solutions are likely to have been major tailwinds for software companies in first-quarter 2024.This is evident from the solid third-quarter fiscal 2024 results delivered by Microsoft MSFT, which was driven by strong momentum across Azure and Office 365. Also, early progress in Copilot for Microsoft 365, and the growing adoption of Teams Phone and Teams Rooms contributed well.

Factors to Consider for Software Stocks

The growing proliferation of generative AI technology, which is leading to increased demand for large language models, is anticipated to have bolstered the prospects of software companies.Increasing demand for IoT and AR/VR devices, and the accelerated deployment of 5G are expected to have aided the performances of software stocks this earnings season.Strong momentum across customer relationship software, employee management tools, natural language processing tools, time tracking tools and cyber security software is expected to have hugely favored the software industry in first-quarter 2024.The solid uptake of enterprise workspace solutions, enterprise communication platforms and online education portals are likely to have contributed well.The growing proliferation of AI-powered virtual assistants, learning management, infrastructure monitoring and business spend management software is expected to have benefited the industry players in the quarter under review.However, sluggish consumer spending due to macroeconomic challenges is likely to have hurt the industry participants. High inflation, a weakening global economy and unfavorable foreign exchange fluctuations are expected to have been major headwinds for the software stocks.