ZACKS·2026-02-11 17:50Core Insights - The Zacks Internet Software industry is experiencing volatility due to fears of AI disrupting the traditional SaaS space, alongside heightened geopolitical risks and tariff uncertainties. However, companies like MongoDB, Digital Turbine, and 8x8 are benefiting from increased demand for digital transformation and cloud solutions driven by the need for remote working and AI-powered applications [1] Industry Overview - The Zacks Internet Software industry includes companies that provide application performance monitoring, infrastructure and application software, DevOps deployment, and security software. The primary revenue sources are subscription and advertising, targeting various end markets such as banking, education, and healthcare [2] Trends Shaping the Industry - Adoption of SaaS Grows: The industry benefits from the demand for digital transformation, with SaaS providing a flexible and cost-effective delivery method for applications, enhancing customer satisfaction and retention [3] - Pay-As-You-Go Model Gains Traction: The customer-centric approach allows users to scale offerings according to needs, with the subscription model ensuring recurring revenues and affordability for small and medium-sized businesses [4] - Ongoing Transition to Cloud Creates Opportunities: The need for secure cloud platforms amid rising cyberattacks drives demand for web-based cybersecurity software and performance management tools [5] Industry Performance - The Zacks Internet Software industry holds a Zacks Industry Rank of 139, placing it in the bottom 43% of over 250 Zacks industries, indicating dull near-term prospects [6][7] - The industry has underperformed the S&P 500 and the broader Computer and Technology sector, returning 16.9% over the past year compared to the S&P 500's 17.2% and the sector's 23.1% [10] Current Valuation - The industry is currently trading at a forward 12-month price-to-sales (P/S) ratio of 4.09X, lower than the S&P 500's 5.30X and the sector's 6.8X, with historical trading ranging from 4.09X to 5.99X over the past five years [13] Company Highlights - MongoDB: This company has seen a 29% year-over-year revenue increase in Q2 of fiscal 2026, adding over 5,000 customers in the past two quarters. Its shares have appreciated 29% in the past year, with a consensus estimate for fiscal 2027 earnings at $5.61 per share [17][18][19] - Digital Turbine: Expected revenues for fiscal 2026 are projected between $553 million and $558 million, with shares dropping 24% in the past year. The consensus estimate for fiscal 2026 earnings is 36 cents per share [22][23] - 8x8: This company has experienced nearly 60% year-over-year growth in usage-based offerings, with shares down 19% over the past year. The consensus estimate for fiscal 2026 earnings is also 36 cents per share [26][27]