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2 Internet Content Stocks to Buy From a Challenging Industry

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The Zacks Internet - Content has been suffering from challenging macroeconomic conditions globally, which is causing a detrimental effect on advertising spending, the primary revenue source for industry participants. Rising AI infrastructure and hosting costs, as well as continuous pressure to improve monetization, have been concerns for industry players. However, industry participants like Similarweb (SMWB - Free Report) and Perion Network (PERI - Free Report) are expanding their presence across multiple channels, driving top-line growth. These companies are benefiting from solid demand for digital offerings, as well as the increasing importance of video content and cloud-based applications. The rapid deployment of AI, Generative AI and Large Language Models (LLMs) is aiding industry players in enhancing the recommendation and search functions of their platforms, thereby improving user experience.

Industry Description

The Zacks Internet - Content industry comprises providers of video encoding platforms, personal services, Internet content and information, staffing and outsourcing services, publishing, capital markets, media-based, home service, digital insights and measurement, stock photo, video and music licensing, and online travel companies. The industry is witnessing a rapid change in consumer behavior and ongoing digitalization. Advertising is a major revenue source for industry participants. Therefore, these companies are trying to expand their digital presence to win customers. They are also expanding their presence across social media, display, connected TV and search. Apart from the United States, a number of companies in this industry are located in Israel, the U.K., Germany, Russia and China.

4 Trends Shaping the Future of the Internet - Content Industry

Demand for Digital Offerings Growing: The shift from traditional search to AI assistants, conversational interfaces, and agentic AI is reshaping how users discover content and interact online. The companies in the Zacks Internet Content industry are continually adapting their products, monetization strategies and distribution models to remain relevant as user behavior evolves and AI platforms become new gateways to digital content.

Industry Prospects Driven by Ad Spending Rate: Industry participants are focusing on marketing efforts to boost traffic to websites. Advertising and subscriptions are major revenue sources for these companies. The industry is dependent on consumer spending trends, making holiday spending a major deciding factor. However, macroeconomic challenges are expected to hurt ad spending.

Rising Competition for Users, Content and AI Leadership: The industry is facing intense competition for user engagement, premium content creators and enterprise customers. User engagement alone is no longer enough. Companies must consistently improve advertising ROI, increase customer retention, expand cross-selling and introduce new monetization models such as AI licensing and consumption-based pricing.

Increasing Regulations Mar Prospects: Industry participants involved in online search and other social networking activities are increasingly facing regulatory pressure, particularly in China and the European Union (EU). The China government has a number of regulations related to direct advertising, which is a prime revenue source for these companies. The implementation of the General Data Protection Regulation in the EU adds to the concerns. Enactment of the Digital Markets Act (DMA) in the EU aims to prevent large online platforms that connect users with content, goods, information and services from abusing their market power. The DMA adds to the headwinds faced by Internet content providers in the EU.

Zacks Industry Rank Indicates Dim Prospects

The Zacks Internet - Content industry is housed within the broader Zacks Computer and Technology sector. It carries a Zacks Industry Rank #233, which places it in the bottom 6% of more than 247 Zacks industries.

The group’s Zacks Industry Rank, which is the average of the Zacks Rank of all the member stocks, indicates dim 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. Since Jan. 31, 2026, the Zacks Consensus Estimate for the industry’s 2026 earnings has moved down 17.2%.

Given the bearish industry outlook, there are only a few stocks worth buying. But before we present the stocks that you may want to consider for your portfolio, let us take a look at the industry’s recent stock market performance and valuation.

Industry Lags S&P and Sector

The Zacks Internet - Content industry has underperformed the broader Zacks Computer and Technology sector, as well as the S&P 500 composite, over the past year.

The industry has declined 29.1% over this period compared with the S&P 500’s appreciation of 16.8% and the 28.7% increase of the broader sector.

One-Year Price Performance

Industry's Current Valuation

On the basis of the trailing 12-month price-to-sales ratio (P/S), which is a commonly used multiple for valuing Internet – Content stocks, we see that the industry is currently trading at 5.70X compared with the S&P 500’s 5.93X and the sector’s 8.88X. 

Over the last five years, the industry has traded as high as 7.80X and as low as 4.72X, the median being 5.87X, as the charts below show.

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

 

2 Internet Stocks to Buy

Similarweb: This Zacks Rank #2 (Buy) company is benefiting from growing demand for its proprietary digital data from AI companies and large enterprises. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

AI-related revenues reached 13% of total revenues in the second quarter of 2026, up from 11% at the end of 2025. The company signed three large multi-year enterprise contracts with a cumulative value of more than $60 million, including a deal with a leading technology company using Similarweb data for Large Language Model (LLM) training. Growing demand for Similarweb’s data across AI agents, OEMs and other enterprise AI applications is creating opportunities to increase data consumption and expand average deal sizes. Remaining Performance Obligation increased 26% year over year to $345 million at the end of second-quarter 2026.

The Zacks Consensus Estimate for SMWB’s 2026 earnings has been steady at 22 cents per share over the past 30 days. Similarweb shares have increased 7.2% on a year-to-date basis.

Price & Consensus: SMWB

 

Perion Network: This Zacks Rank #2 company is benefiting from accelerating adoption of Perion One as advertisers shift budgets toward CTV, Digital Out of Home and Retail Media. Perion One spend increased 15% year over year to $156.7 million in the second quarter of 2026 and represented 80% of total spend. Outmax, Perion’s AI-powered optimization agent, also recorded 136% year-over-year pro-forma spend growth, supporting the company’s land-and-expand strategy across advertisers and agencies.

Perion’s recently signed large-scale strategic agreements provide a catalyst for stronger growth in the second half of 2026 and into 2027. The company expects these deals to begin making a material contribution toward the end of the third quarter and accelerate thereafter.

The Zacks Consensus Estimate for Perion’s 2026 earnings has been steady at $1.17 per share over the past 30 days. PERI shares have dropped 10.8% YTD.

Price & Consensus: PERI


 


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