3 Internet Software Stocks to Buy From a Challenging Industry

The Zacks Internet Software industry stocks have seen volatility as fears of AI disrupting the traditional Software as a Service (SaaS) space continue to gain traction. Heightened geopolitical risks and tariff uncertainties are major headwinds. However, industry players like MongoDB MDB, Digital Turbine APPS and 8x8 EGHT have been benefiting from accelerated demand for digital transformation and the ongoing shift to the cloud. The high demand for AI-powered SaaS solutions due to the increasing need for remote working, learning and diagnosis software has been a major driver for industry players. The increasing deployment of AI and generative AI is driving prospects. Industry players are leveraging AI to generate content that is keeping users engaged and attracting advertisers. Increasingly sophisticated cyberattacks have been driving cybersecurity application demand. 

Industry Description

The Zacks Internet Software industry comprises companies offering application performance monitoring, infrastructure and application software, DevOps deployment and Security software. Industry participants offer online payment solutions, asset optimization software, multi-cloud application security and delivery, social networking, 3D printing applications, and cloud content management solutions. They use the SaaS-based cloud computing model to deliver solutions to end-users, as well as enterprises. Hence, subscription is the primary revenue source. Advertising is also a major revenue source. Industry participants target a variety of end markets, including banking and financial services, construction, consumer packaged goods, education, energy, legal, various service providers, federal governments, and animal health technology and services.

3 Trends Shaping the Future of the Internet Software Industry

Adoption of SaaS Grows: The industry has been benefiting from the continued demand for digital transformation. Growth prospects are alluring due to the rapid adoption of SaaS, which offers a flexible and cost-effective delivery method for applications. It also cuts down on deployment time compared with legacy systems. SaaS attempts to deliver applications to any user, anywhere, anytime and on any device. It has been effective in addressing customer expectations of seamless communications across multiple channels, including voice, chat, email, web, social media and mobile. This increases customer satisfaction and raises the retention rate, driving the top lines of the industry participants. Moreover, the SaaS delivery model has supported industry players in delivering software applications amid the coronavirus-led lockdowns and shelter-in-place guidance. Remote work, learning and health diagnosis have also boosted the demand for SaaS-based software applications.

Pay-As-You-Go Model Gains Traction: 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 according to different user needs. The subscription-based business model ensures recurring revenues for industry participants. The affordability of the SaaS delivery model, particularly for small and medium-sized businesses, is another major driver. The cloud-based applications are easy to use. Hence, the need for specialized training is reduced significantly, which lowers expenses, driving profits.

Ongoing Transition to Cloud Creates Opportunities: The growing need to secure cloud platforms amid the increasing incidences of cyberattacks and hacking drives the demand for web-based cybersecurity software. As enterprises continue to move their on-premise workload to cloud environments, application and infrastructure monitoring are gaining importance. This is increasing the demand for web-based performance management monitoring tools.

Zacks Industry Rank Indicates Dim Prospects

The Zacks Internet Software industry, placed within the broader Zacks Computer and Technology sector, carries a Zacks Industry Rank #139, which places it in the bottom 43% 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 dull 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 position in the bottom 50% of the Zacks-ranked industries is a result of a negative earnings outlook for the constituent companies in aggregate. Looking at the aggregate earnings estimate revisions, it appears that analysts are pessimistic about this group’s earnings growth potential. The industry’s earnings estimates for 2025 have moved up 8% since April 30, 2025.

Given the bearish outlook of the industry, there are only a few stocks worth picking for healthy portfolio returns. However, before we present the top industry picks, it is worth looking at the industry’s shareholder returns and current valuation first.

Industry Lags S&P 500 and Sector

The Zacks Internet Software industry has underperformed the broader Zacks Computer and Technology sector and the S&P 500 Index in the past year.

The industry has returned 16.9% over this period compared with the S&P 500’s jump of 17.2% and the broader sector’s appreciation of 23.1%.

One-Year Price Performance

Industry's Current Valuation

On the basis of forward 12-month price-to-sales (P/S), which is a commonly used multiple for valuing Internet Software stocks, we see that the industry is currently trading at 4.09X compared with the S&P 500’s 5.30X and the sector’s forward 12-month P/S of 6.8X. 

Over the last five years, the industry has traded as high as 5.99X and as low as 4.09X, with a median of 5.31X, as the charts below show.

Forward 12-Month Price-to-Sales (P/S) Ratio
 

 

 

 

3 Stocks to Buy Right Now

MongoDB: This Zacks Rank #1 (Strong Buy) stock is benefiting from strong demand for Atlas, with revenues increasing 29% year over year in the second quarter of fiscal 2026. You can see the complete list of today’s Zacks #1 Rank stocks here.

MDB’s expanding clientele is a key catalyst. The company added more than 5,000 customers over the past two quarters, reflecting the strength of MongoDB's platform, flexible document model, expanded capabilities like search and vector search, enterprise readiness and the ability to run anywhere. Over 70% of the Fortune 500, as well as 7 of the 10 largest banks, 14 of the largest 15 health care companies, and 9 of the 10 largest manufacturers globally are MongoDB customers.

MongoDB shares have appreciated 29% in the past year. The Zacks Consensus Estimate for fiscal 2027 earnings has inched up 0.7% to $5.61 per share over the past 30 days.

Price and Consensus: MDB

 

Digital Turbine: Another Zacks Rank #1 company, APPS is benefiting from accelerating business momentum across both on-device solutions and App Growth Platform segments. Digital Turbine now expects revenues to be in the range of $553 million to $558 million and adjusted EBITDA to be in the range of $114 million to $117 million for fiscal 2026.

Digital Turbine shares have dropped 24% in the past year. The Zacks Consensus Estimate for its fiscal 2026 earnings is pegged at 36 cents per share, up 3 cents in the past 30 days.

Price and Consensus: APPS

 

Price and Consensus: EGHT

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MongoDB, Inc. (MDB): Free Stock Analysis Report
 
8x8 Inc (EGHT): Free Stock Analysis Report
 
Digital Turbine, Inc. (APPS): Free Stock Analysis Report

This article originally published on Zacks Investment Research (zacks.com).

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