The Zacks Internet Software industry is anticipated to have witnessed robust performance in the first quarter of 2024, driven by the accelerated demand for digital transformation and ongoing cloud migration. The industry has been gaining from the increasing need for hybrid operating environments in working, learning and diagnosis software, as well as cybersecurity applications. The increasing deployment of AI and generative AI is driving prospects.

Notable players like Perfect Corp. (PERF Quick QuotePERF - Free Report) , Meta Platforms (META Quick QuoteMETA - Free Report) and 2U (TWOU Quick QuoteTWOU - Free Report) are likely to have benefited from steady subscription and advertising revenues, which are likely to have fueled top-line growth in the to-be-reported quarter. The pay-as-you-go model and the affordability of the Software-as-a-Service (SaaS) delivery model, particularly for small and medium-sized businesses, have been major catalysts.

The cloud-based applications offered through this model are not only easy to use but also significantly reduce the need for specialized training, thereby lowering expenses and driving profitability.

As businesses increasingly adopt hybrid operating environments, the demand for solutions that support such setups has become noteworthy. Internet software companies have responded to this trend by enhancing their offerings to secure cloud platforms amid the rising incidences of cyber-attacks and hacking, further fueling the demand for web-based cybersecurity software.

The Internet Software space is a crucial component of the broader technology sector, which encompasses 16 broad Zacks sectors within the Zacks Industry classification. Per the latest Earnings Preview, the total earnings of technology companies for first-quarter 2024 are expected to be up 19.4% from the same period last year on 8.3% higher revenues.

Insight Into Key Releases

Ahead of their upcoming first-quarter 2024 earnings releases, let's take a look at the three abovementioned Internet Software stocks.

The Zacks model suggests that a company needs to have the right combination of two key ingredients — a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) — to increase the odds of an earnings beat. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

You can see the complete list of today's Zacks #1 Rank stocks here.

Perfect Corp.: The company is expected to have benefited from robust demand for its cutting-edge artificial intelligence (AI) and augmented reality (AR) solutions across various industries in the quarter under review. PERF's innovative offerings, such as AI-powered skincare diagnosis tools and virtual try-on solutions for the jewelry and fashion sectors, are likely to have witnessed increased demand, contributing to top-line growth.

PERF has successfully expanded its reach into new verticals, including skincare clinics, medspas, and aesthetic clinics, by leveraging its AI-powered skin diagnosis technology. This strategic move is expected to have bolstered the company's performance during the quarter under review.

PERF's unwavering commitment to innovation has been a driving force behind its success. The development of AI-powered virtual try-on solutions for wigs and other AI hair solutions has garnered significant attention, attracting more users and contributing to the company's top-line growth during the first quarter. (Read more: Perfect to Report Q1 Earnings: What's in the Cards?)

The Zacks Consensus Estimate for PERF first-quarter 2024 earnings has remained unchanged at 1 cent per share in the past 30 days. For the March quarter, the Zacks Consensus Estimate for total revenues is currently pegged at $14.14 million, suggesting growth of 16.3% from the year-ago quarter’s levels.

Perfect Corp., with an Earnings ESP of 0.00% and a Zacks Rank #1, is slated to report on Apr 24. The company’s earnings outpaced estimates in all the trailing four quarters, the average surprise being 275%.

Meta Platforms: The company has been benefiting from steady user growth across all regions, particularly the Asia Pacific. Increased engagement for its offerings, such as Instagram, WhatsApp, Messenger and Facebook, has been a major growth driver.

Meta is leveraging AI to recommend Reels content, which is driving traffic on Instagram and Facebook. Its innovative portfolio, which includes Threads, Reels, Llama 2, Ray-Ban Meta smart glass and mixed reality device Quest 3, is likely to aid prospects.

Meta has been incorporating gen AI to boost user experience across its apps to help creators create different captions and thumbnails. AI stickers, AI-based editing tools, advanced conversational assistant — Meta AI — and others to improve user engagement. (Read more: Meta Platforms to Report Q1 Earnings: What to Expect)

The Zacks Consensus Estimate for META’s first-quarter 2024 earnings has moved north by 1.2% to $4.32 per share in the past 30 days. For the quarter, the Zacks Consensus Estimate for total revenues is currently pegged at $36.25 billion, suggesting growth of 26.6% from the year-ago quarter’s levels.

Meta Platforms, with an Earnings ESP of +0.62% and a Zacks Rank #2, is slated to report on Apr 24. The company’s earnings outpaced estimates in all the trailing four quarters, the average surprise being 19.71%.

2U: The company has solidified its position through significant partnerships with prestigious institutions like the University of Surrey, the University of Cape Town, The Raspberry Pi Foundation, and Tel Aviv University, among others. These collaborations are anticipated to have bolstered the company's average program revenues during the first quarter.

By consistently investing in educational opportunities that cultivate future-ready skills, 2U empowers individuals to adapt to evolving job markets, stimulating economic growth and paving the way for a more inclusive and prosperous future for all. This strategic focus on developing alternative credentials aligned with emerging workforce demands is expected to have driven substantial revenue growth in this segment during the to-be-reported quarter.

2U's commitment to bridging the skills gap through innovative educational models positions the company as a catalyst for personal and professional development in an ever-changing global economy.

The Zacks Consensus Estimate for 2U’s first-quarter 2024 bottom line is pegged at a loss of 34 cents per share, unchanged in the past 30 days. For the quarter, the Zacks Consensus Estimate for total revenues is currently pegged at $195.3 million, suggesting a decline of 18.1% from the year-ago quarter’s levels.

2U has an Earnings ESP of 0.00% and a Zacks Rank #3. The company’s earnings missed estimates in all the trailing four quarters, the average negative surprise being 143.69%.

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