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4 Software Stocks Likely to Deliver an Earnings Beat This Season
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Software stocks are entering the current earnings season with several growth drivers in their favor. Businesses continue to spend on digital transformation, while artificial intelligence (AI) is moving beyond experimentation and becoming an important part of daily operations. Companies are beginning to see practical benefits from generative AI and the emerging wave of agentic AI, which can perform tasks with limited human intervention. Meanwhile, cloud computing, software-as-a-service (SaaS), hybrid work solutions and digital payments continue to support industry growth.
This favorable backdrop suggests that software companies with strong execution and AI exposure could once again outperform analysts’ expectations. Against this setting, Affirm Holdings, Inc. (AFRM - Free Report) , Paylocity Holding Corporation (PCTY - Free Report) , Block, Inc. (XYZ - Free Report) and BILL Holdings, Inc. (BILL - Free Report) stand out as companies with the potential to deliver earnings beats.
What’s Going in Favor of Software Stocks?
AI adoption remains a key growth driver for the software industry. Businesses are increasingly using AI-powered tools for voice recognition, infrastructure monitoring, spending management and other essential operations. Demand for collaboration platforms, communication software, telehealth solutions and learning management systems also remains healthy as companies continue to modernize their workplaces and services. The shift toward AI is particularly encouraging for software providers that can demonstrate measurable improvements in productivity and cost savings.
Cloud computing provides another important tailwind. The growing number of Internet of Things (IoT) devices, expanding augmented and virtual reality applications, and wider adoption of 5G networks are increasing the need for scalable cloud-based solutions. Businesses are also investing in remote desktop software, natural language processing tools and productivity platforms. These trends create opportunities for software companies to generate recurring revenues and deepen customer relationships.
Cybersecurity spending is another source of support. As cyberattacks become more frequent and sophisticated, businesses are placing greater emphasis on cloud-native security solutions. Companies are also moving away from traditional hardware-heavy infrastructure toward software-defined systems that offer greater flexibility, easier scaling and potentially lower operating costs. Software providers that help customers address security risks while controlling expenses could benefit from this shift.
The industry's move toward customer-focused platforms is also helping sustain demand. Modern software solutions allow customers to automate routine tasks and manage operations with less manual support from vendors. Flexible, usage-based pricing makes it easier for businesses to adjust spending as their needs change, while subscription models provide software companies with a more predictable revenue stream. These advantages are particularly attractive to small and medium-sized businesses (SMBs), which continue to adopt cloud-based tools to improve efficiency without making large upfront investments.
How to Identify Potential Outperformers?
With so many software companies competing for investor attention, identifying those most likely to beat earnings estimates can be challenging. However, our proprietary methodology makes this task simple.
You could narrow down your choices by looking at stocks that have the perfect combination of two key elements — a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold).
Earnings ESP is our proprietary methodology for determining stocks that have the maximum chances of beating estimates in their next earnings announcement. It is the percentage difference between the Most Accurate Estimate and the Zacks Consensus Estimate. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.
Our research shows that for stocks with this favorable mix of ingredients, the odds of a positive earnings surprise are as high as 70%.
Top Bets
Affirm Holdings is slated to report first-quarter fiscal 2027 results on Nov. 5. The company carries a Zacks Rank #3 and has an Earnings ESP of +14.49%. You can see the complete list of today’s Zacks #1 Rank stocks here.
The Zacks Consensus Estimate for first-quarter revenues is pegged at $1.22 billion, which calls for a year-over-year increase of 30.3%. The consensus mark for earnings stands at 35 cents per share, indicating a year-over-year jump of 52.2%.
Affirm is benefiting from the growing adoption of its buy now, pay later solutions among online merchants and consumers. The company is currently available on 80 of the top 250 e-commerce websites, highlighting significant opportunities for further merchant penetration. Expanding relationships with major payment service providers, growing merchant integrations and increasing consumer preference for flexible payment options are expected to support gross merchandise volume growth.
Affirm’s growth prospects are benefiting from increasing adoption of the Affirm Card and expansion into offline commerce. Consumers using the Affirm Card spend approximately twice as much as average Affirm consumers, highlighting the product’s potential to drive higher engagement and transaction volumes.
Paylocity will report first-quarter fiscal 2027 results on Nov. 5. The company carries a Zacks Rank #3 and has an Earnings ESP of +2.07%. The Zacks Consensus Estimate for first-quarter revenues is pegged at $442.4 million, which calls for a year-over-year increase of 8.4%. The consensus mark for earnings stands at $1.93 per share, indicating a 10.3% year-over-year improvement.
Paylocity's integrated human capital management platform remains a key competitive advantage. Its solutions help mid-sized businesses manage payroll, human resources and related processes through a connected platform. Once these tools become part of a customer's daily operations, switching to another provider can be difficult. This creates opportunities for recurring revenues, customer retention and further product adoption.
AI is becoming an increasingly important part of Paylocity's growth strategy. Rather than limiting AI to a stand-alone feature, the company is integrating it into HR, finance and IT workflows. Ignite AI introduces specialized agents across payroll, time management and recruiting, while the Ignite AI Hub helps administrators manage AI adoption. The April 2026 acquisition of Grayscale expanded its AI-powered recruiting automation capabilities, and the July 2026 acquisition of Aidora added AI-native leave management tools. These investments are improving the platform's appeal, increasing customer engagement and creating opportunities for additional revenues.
Paylocity Holding Corporation Price and EPS Surprise
Block is scheduled to report third-quarter 2026 results on Nov. 3. The company currently carries a Zacks Rank #3 and has an Earnings ESP of +1.67%. The Zacks Consensus Estimate for third-quarter revenues is pegged at $6.63 billion, which calls for a year-over-year increase of 8.4%. The consensus mark for earnings stands at $1.02 per share, indicating a rise of 88.9% from the year-ago quarter’s earnings of 54 cents.
Block's strength lies in its ability to serve both businesses and individual consumers. Square provides merchants with payment processing and business management tools, while Cash App offers consumers a range of financial services. This combination gives Block multiple ways to generate revenues and creates opportunities to cross-sell products across its ecosystem. Greater engagement across both platforms could also improve customer retention and monetization.
The company's growth strategy extends beyond transaction processing. Block continues to invest in technology and partnerships to make its commerce platform more useful to businesses across different industries. Collaborations with Birch Coffee, GOLFTEC and Steak Escape illustrate the platform's adoption across varied business categories. As more businesses join its ecosystem, Block appears well-positioned to sustain healthy growth and potentially outperform earnings expectations.
BILL Holdings is scheduled to report first-quarter fiscal 2027 results on Nov. 5. The company carries a Zacks Rank #3 and has an Earnings ESP of +0.15%. The Zacks Consensus Estimate for first-quarter revenues is pegged at $438.7 million, which calls for a year-over-year increase of 10.9%. The consensus mark for earnings stands at 98 cents per share, indicating a year-over-year rise of 60.7%.
BILL is benefiting from demand among SMBs for simpler ways to manage accounts payable, accounts receivable and other financial operations. Its platform helps businesses automate routine financial tasks, reduce manual work and improve visibility into cash flows. This focus on an essential business function can support customer retention and recurring revenues as more SMBs adopt digital financial tools.
AI is another potential growth driver. BILL is working to make its products easier to use and more automated, with the goal of helping customers complete financial tasks more efficiently. Its offerings include BILL Cash Account, Supplier Payments Plus and BILL W-9 Agent, which support different aspects of business financial management. These innovations could strengthen the company's value proposition and encourage customers to use more of its services.
BILL's balance sheet and ability to generate free cash flow also provide the financial flexibility to invest in product development and expand its platform.
View the Zacks #1 Rank List
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4 Software Stocks Likely to Deliver an Earnings Beat This Season
Software stocks are entering the current earnings season with several growth drivers in their favor. Businesses continue to spend on digital transformation, while artificial intelligence (AI) is moving beyond experimentation and becoming an important part of daily operations. Companies are beginning to see practical benefits from generative AI and the emerging wave of agentic AI, which can perform tasks with limited human intervention. Meanwhile, cloud computing, software-as-a-service (SaaS), hybrid work solutions and digital payments continue to support industry growth.
This favorable backdrop suggests that software companies with strong execution and AI exposure could once again outperform analysts’ expectations. Against this setting, Affirm Holdings, Inc. (AFRM - Free Report) , Paylocity Holding Corporation (PCTY - Free Report) , Block, Inc. (XYZ - Free Report) and BILL Holdings, Inc. (BILL - Free Report) stand out as companies with the potential to deliver earnings beats.
What’s Going in Favor of Software Stocks?
AI adoption remains a key growth driver for the software industry. Businesses are increasingly using AI-powered tools for voice recognition, infrastructure monitoring, spending management and other essential operations. Demand for collaboration platforms, communication software, telehealth solutions and learning management systems also remains healthy as companies continue to modernize their workplaces and services. The shift toward AI is particularly encouraging for software providers that can demonstrate measurable improvements in productivity and cost savings.
Cloud computing provides another important tailwind. The growing number of Internet of Things (IoT) devices, expanding augmented and virtual reality applications, and wider adoption of 5G networks are increasing the need for scalable cloud-based solutions. Businesses are also investing in remote desktop software, natural language processing tools and productivity platforms. These trends create opportunities for software companies to generate recurring revenues and deepen customer relationships.
Cybersecurity spending is another source of support. As cyberattacks become more frequent and sophisticated, businesses are placing greater emphasis on cloud-native security solutions. Companies are also moving away from traditional hardware-heavy infrastructure toward software-defined systems that offer greater flexibility, easier scaling and potentially lower operating costs. Software providers that help customers address security risks while controlling expenses could benefit from this shift.
The industry's move toward customer-focused platforms is also helping sustain demand. Modern software solutions allow customers to automate routine tasks and manage operations with less manual support from vendors. Flexible, usage-based pricing makes it easier for businesses to adjust spending as their needs change, while subscription models provide software companies with a more predictable revenue stream. These advantages are particularly attractive to small and medium-sized businesses (SMBs), which continue to adopt cloud-based tools to improve efficiency without making large upfront investments.
How to Identify Potential Outperformers?
With so many software companies competing for investor attention, identifying those most likely to beat earnings estimates can be challenging. However, our proprietary methodology makes this task simple.
You could narrow down your choices by looking at stocks that have the perfect combination of two key elements — a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold).
Earnings ESP is our proprietary methodology for determining stocks that have the maximum chances of beating estimates in their next earnings announcement. It is the percentage difference between the Most Accurate Estimate and the Zacks Consensus Estimate. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.
Our research shows that for stocks with this favorable mix of ingredients, the odds of a positive earnings surprise are as high as 70%.
Top Bets
Affirm Holdings is slated to report first-quarter fiscal 2027 results on Nov. 5. The company carries a Zacks Rank #3 and has an Earnings ESP of +14.49%. You can see the complete list of today’s Zacks #1 Rank stocks here.
The Zacks Consensus Estimate for first-quarter revenues is pegged at $1.22 billion, which calls for a year-over-year increase of 30.3%. The consensus mark for earnings stands at 35 cents per share, indicating a year-over-year jump of 52.2%.
Affirm is benefiting from the growing adoption of its buy now, pay later solutions among online merchants and consumers. The company is currently available on 80 of the top 250 e-commerce websites, highlighting significant opportunities for further merchant penetration. Expanding relationships with major payment service providers, growing merchant integrations and increasing consumer preference for flexible payment options are expected to support gross merchandise volume growth.
Affirm’s growth prospects are benefiting from increasing adoption of the Affirm Card and expansion into offline commerce. Consumers using the Affirm Card spend approximately twice as much as average Affirm consumers, highlighting the product’s potential to drive higher engagement and transaction volumes.
Affirm Holdings, Inc. Price and EPS Surprise
Affirm Holdings, Inc. price-eps-surprise | Affirm Holdings, Inc. Quote
Paylocity will report first-quarter fiscal 2027 results on Nov. 5. The company carries a Zacks Rank #3 and has an Earnings ESP of +2.07%. The Zacks Consensus Estimate for first-quarter revenues is pegged at $442.4 million, which calls for a year-over-year increase of 8.4%. The consensus mark for earnings stands at $1.93 per share, indicating a 10.3% year-over-year improvement.
Paylocity's integrated human capital management platform remains a key competitive advantage. Its solutions help mid-sized businesses manage payroll, human resources and related processes through a connected platform. Once these tools become part of a customer's daily operations, switching to another provider can be difficult. This creates opportunities for recurring revenues, customer retention and further product adoption.
AI is becoming an increasingly important part of Paylocity's growth strategy. Rather than limiting AI to a stand-alone feature, the company is integrating it into HR, finance and IT workflows. Ignite AI introduces specialized agents across payroll, time management and recruiting, while the Ignite AI Hub helps administrators manage AI adoption. The April 2026 acquisition of Grayscale expanded its AI-powered recruiting automation capabilities, and the July 2026 acquisition of Aidora added AI-native leave management tools. These investments are improving the platform's appeal, increasing customer engagement and creating opportunities for additional revenues.
Paylocity Holding Corporation Price and EPS Surprise
Paylocity Holding Corporation price-eps-surprise | Paylocity Holding Corporation Quote
Block is scheduled to report third-quarter 2026 results on Nov. 3. The company currently carries a Zacks Rank #3 and has an Earnings ESP of +1.67%. The Zacks Consensus Estimate for third-quarter revenues is pegged at $6.63 billion, which calls for a year-over-year increase of 8.4%. The consensus mark for earnings stands at $1.02 per share, indicating a rise of 88.9% from the year-ago quarter’s earnings of 54 cents.
Block's strength lies in its ability to serve both businesses and individual consumers. Square provides merchants with payment processing and business management tools, while Cash App offers consumers a range of financial services. This combination gives Block multiple ways to generate revenues and creates opportunities to cross-sell products across its ecosystem. Greater engagement across both platforms could also improve customer retention and monetization.
The company's growth strategy extends beyond transaction processing. Block continues to invest in technology and partnerships to make its commerce platform more useful to businesses across different industries. Collaborations with Birch Coffee, GOLFTEC and Steak Escape illustrate the platform's adoption across varied business categories. As more businesses join its ecosystem, Block appears well-positioned to sustain healthy growth and potentially outperform earnings expectations.
Block, Inc. Price and EPS Surprise
Block, Inc. price-eps-surprise | Block, Inc. Quote
BILL Holdings is scheduled to report first-quarter fiscal 2027 results on Nov. 5. The company carries a Zacks Rank #3 and has an Earnings ESP of +0.15%. The Zacks Consensus Estimate for first-quarter revenues is pegged at $438.7 million, which calls for a year-over-year increase of 10.9%. The consensus mark for earnings stands at 98 cents per share, indicating a year-over-year rise of 60.7%.
BILL is benefiting from demand among SMBs for simpler ways to manage accounts payable, accounts receivable and other financial operations. Its platform helps businesses automate routine financial tasks, reduce manual work and improve visibility into cash flows. This focus on an essential business function can support customer retention and recurring revenues as more SMBs adopt digital financial tools.
AI is another potential growth driver. BILL is working to make its products easier to use and more automated, with the goal of helping customers complete financial tasks more efficiently. Its offerings include BILL Cash Account, Supplier Payments Plus and BILL W-9 Agent, which support different aspects of business financial management. These innovations could strengthen the company's value proposition and encourage customers to use more of its services.
BILL's balance sheet and ability to generate free cash flow also provide the financial flexibility to invest in product development and expand its platform.
BILL Holdings, Inc. Price and EPS Surprise
BILL Holdings, Inc. price-eps-surprise | BILL Holdings, Inc. Quote