Zacks Industry Outlook Fortinet, Zoom Communications and Twilio

Core Viewpoint - The Zacks Internet Software industry is experiencing growth driven by digital transformation, cloud adoption, and increased demand for SaaS solutions, despite facing challenges from geopolitical risks and inflation [2][3][12]. Industry Overview - The Zacks Internet Software industry includes companies that provide application performance monitoring, infrastructure and application software, DevOps deployment, and security software [4]. - Key revenue sources for industry participants include subscription models and advertising, targeting various sectors such as banking, education, and government [5]. Trends Influencing the Industry - Adoption of SaaS Growing: The industry benefits from the rapid adoption of SaaS, which offers flexible and cost-effective application delivery, reducing deployment time compared to legacy systems [6][8]. - Pay-As-You-Go Model Gaining Traction: This model allows users to scale offerings based on their needs, ensuring recurring revenues and reducing the need for specialized training [9]. - Ongoing Transition to Cloud Creating Opportunities: The shift to cloud environments increases demand for web-based performance management and cybersecurity solutions [10][11]. Industry Performance - The Zacks Internet Software industry ranks 37, placing it in the top 15% of over 250 Zacks industries, indicating strong near-term prospects [12][13]. - The industry's earnings estimates for 2024 have increased by 8.3% since September 30, 2024, reflecting positive analyst sentiment [14]. Financial Performance - The industry has outperformed the S&P 500 and the broader Computer and Technology sector, returning 51.8% over the past year compared to the S&P 500's 32.2% [16]. - The current trailing 12-month price-to-sales (P/S) ratio for the industry is 3.94X, lower than the S&P 500's 5.81X and the sector's 7.17X [17]. Company Highlights - Fortinet (FTNT): This company is experiencing strong demand from large enterprises, with shares gaining 80.9% in the past year and a consensus estimate for 2024 earnings at $2.23 per share, up 9.3% [19]. - Twilio (TWLO): Benefiting from digital transformations, Twilio's shares have appreciated 54.8% in the past year, with a consensus estimate for 2024 earnings at $3.64 per share [21]. - Zoom Communications (ZM): Gaining traction from the hybrid working trend, Zoom's shares returned 17.9% in the past year, with a fiscal 2025 earnings estimate of $5.42 per share, up 1.5% [23].