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Chicago, IL – June 11, 2025 – Today, Zacks Equity Research discusses A10 Networks ATEN and Ondas ONDS.
Link: https://www.zacks.com/commentary/2492852/2-network-software-stocks-to-watch-from-a-prospering-industry
The Zacks Communication-Network Software industry players like A10 Networks and Ondas are gaining from the ongoing digitalization efforts, including a shift to cloud computing and the rapid deployment of 5G-based networks. The strong demand for network security benefits industry participants, as a secure environment is required to run cloud-based applications.
Industry players are leveraging artificial intelligence (AI) and machine learning to develop security solutions, thereby providing better threat protection systems. However, the industry players are suffering from challenging macroeconomic conditions and persistent inflation. Small and medium businesses have deferred capital spending on infrastructure buildout due to higher interest rates and inflation, which does not bode well for industry players.
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 of the future.
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.
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.
The Zacks Communication-Network Software industry is housed within the broader Zacks Computer And Technology sector. It carries a Zacks Industry Rank #93, which places it in the top 38% 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 bright 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.
Given the bullish prospects, there are a handful 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.
The Zacks Communication-Network Software industry has outperformed the Zacks S&P 500 composite and its sector in the past year.
The industry has appreciated 23% over this period compared with the Zacks Computer and Technology sector's return of 10.6% and the S&P 500's appreciation of 11.6%.
On the basis of trailing 12-month EV/Sales, a commonly used multiple for valuing network software companies, we see that the industry is currently trading at 2.68X compared with the S&P 500's 5.19X and the sector's 7.08X.
Over the past five years, the industry has traded as high as 2.83X and as low as 2.35X, with the median being 2.7X.
A10 Networks: This Zacks Rank #2 (Buy) company is a leading provider of security and infrastructure solutions for on-premises, hybrid cloud, and edge-cloud environments. You can see the complete list of today's Zacks #1 Rank (Strong Buy) stocks here.
A10 Networks is benefiting from strong demand for its solutions from AI-related data centers. ATEN's solutions offer industry-leading efficiency in terms of throughput and low latency, along with integrated security capabilities. A10 Networks' initiatives to develop solutions for Bot Protection, DDoS mitigation and technologies designed specifically for GPU-based AI infrastructure are noteworthy. ATEN's 2025 prospects are expected to be driven by strong security revenue growth.
San Jose, CA-based A10 Networks' shares have declined 0.3% year to date. The Zacks Consensus Estimate for ATEN's 2025 earnings has been steady at 88 cents per share in the past 30 days.
Ondas: This Zacks Rank #3 (Hold) company is a provider of private wireless, drone, and automated data solutions. Ondas Networks provides wireless connectivity solutions enabling mission-critical Industrial Internet applications and services. Ondas Autonomous Systems' business unit develops and integrates drone-based solutions focusing on high-performance critical applications for government and Tier-1 commercial enterprises.
The company is benefiting from strong demand for its Autonomous Drone platforms. At the end of the first quarter of 2025, order backlog was $16.8 million. Based on strong demand for both Iron Drone and Optimus Ondas expects orders to grow with revenues of at least $25 million for 2025.
Shares of Boston, MA-based Ondas have declined 34.4% year to date. The Zacks Consensus Estimate for Ondas' 2025 loss has narrowed by a penny to 39 cents per share over the past 30 days.
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Past performance is no guarantee of future results. Inherent in any investment is the potential for loss. This material is being provided for informational purposes only and nothing herein constitutes investment, legal, accounting or tax advice, or a recommendation to buy, sell or hold a security. No recommendation or advice is being given as to whether any investment is suitable for a particular investor. It should not be assumed that any investments in securities, companies, sectors or markets identified and described were or will be profitable. All information is current as of the date of herein and is subject to change without notice. Any views or opinions expressed may not reflect those of the firm as a whole. Zacks Investment Research does not engage in investment banking, market making or asset management activities of any securities. These returns are from hypothetical portfolios consisting of stocks with Zacks Rank = 1 that were rebalanced monthly with zero transaction costs. These are not the returns of actual portfolios of stocks. The S&P 500 is an unmanaged index. Visit https://www.zacks.com/performance for information about the performance numbers displayed in this press release.
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This article originally published on Zacks Investment Research (zacks.com).
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