Industry Overview - The Internet Software and Services sector is experiencing growth due to increased IT spending on solutions that support hybrid operating environments and the high penetration of mobile devices among users [1][2] Investment Outlook - The Internet Software industry is ranked in the top 37% of the Zacks Industry Rank, indicating an expectation to outperform the market in the next three to six months [2] AI-Focused Stocks - Five AI-focused stocks are recommended for strong potential by 2026: Palantir Technologies Inc. (PLTR), HubSpot Inc. (HUBS), MongoDB Inc. (MDB), Calix Inc. (CALX), and Fastly Inc. (FSLY). Each stock carries a Zacks Rank of 1 (Strong Buy) or 2 (Buy) [3] Palantir Technologies Inc. (PLTR) - PLTR's core customer base includes large government and corporate clients seeking tailored AI/ML services, with a comprehensive AI strategy that integrates its Foundry and Gotham platforms [6][8] - PLTR's AIP enables organizations to process large datasets for real-time insights, particularly in sectors like defense, healthcare, and finance [7] - The company has an expected revenue growth rate of 61.3% and earnings growth rate of 78.7% for the current year, with a 28.8% improvement in the Zacks Consensus Estimate for earnings over the last 30 days [11] HubSpot Inc. (HUBS) - HUBS is experiencing growth through multi-hub adoption and pricing optimization, with significant opportunities for cross-selling products [12][13] - The company has integrated AI across its product suites, enhancing customer value without additional costs, and expects a revenue growth rate of 17.9% and earnings growth rate of 26.7% for the current year [14] MongoDB Inc. (MDB) - MDB has expanded its Atlas platform into analytics, focusing on developer-friendly interfaces and distributed architectures, targeting agile development and modern workloads [15] - The company has an expected revenue growth rate of 17.8% and earnings growth rate of 17.2% for the current year, with a 0.7% improvement in the Zacks Consensus Estimate for earnings over the last 30 days [18] Calix Inc. (CALX) - CALX provides cloud and software platforms for communications service providers, integrating AI to enhance operations and subscriber engagement [19][20] - The company has an expected revenue growth rate of 15.6% and earnings growth rate of 41.5% for the current year, with a 5% improvement in the Zacks Consensus Estimate for earnings over the last 30 days [21] Fastly Inc. (FSLY) - FSLY offers infrastructure software for cloud computing and security, operating on a unique platform that allows custom code execution at the edge of the internet [22] - The company has an expected revenue growth rate of 14% and earnings growth rate of over 100% for the current year, with a 73.3% improvement in the Zacks Consensus Estimate for earnings over the last 30 days [23]

Key Takeaways SNOW is set to report Q4 fiscal 2026 results on Feb. 25 with revenue seen up 26.85%. Snowflake's AI push drove 50% of Q3 bookings and a $100M AI revenue run rate. SNOW trades at 10.19X forward sales, reflecting a premium valuation amid competition. Snowflake (SNOW) is set to release fourth-quarter fiscal 2026 results on Feb. 25.The Zacks Consensus Estimate for fourth-quarter fiscal 2026 earnings has remained steady at 27 cents per share over the past 30 days, indicating a year-over-year declin ...

Core Insights - CoreWeave, Inc. (CRWV) is set to report its fourth-quarter 2025 results on February 26, with a consensus estimate for a loss of 45 cents per share and total revenues of $1.5 billion [1] - The company has seen a significant revenue increase of 134% year-over-year, driven by strong demand for its AI cloud services [6][7] - CRWV's backlog has been bolstered by multi-billion-dollar contracts, including a $22.4 billion expansion with OpenAI and a $14.2 billion agreement with Meta through 2031, enhancing revenue visibility [8][10] Financial Performance - In the third quarter, CRWV's loss narrowed to 22 cents per share from a loss of $1.82 in the same quarter last year, with an adjusted net loss of $41 million compared to an adjusted net income of $67 million a year ago [3] - The company has an Earnings ESP of 0.00% and a Zacks Rank of 3, indicating no expected earnings beat for the upcoming quarter [4][5] Market Position and Growth Drivers - CoreWeave's strategic partnerships, particularly with NVIDIA, have been crucial for its revenue growth, with NVIDIA investing $2 billion to expand CRWV's data center capacity [10] - The company has successfully diversified its customer base, with no single client accounting for more than 35% of its backlog, down from 85% at the beginning of the year [9] Challenges and Outlook - Despite strong demand, CRWV faces challenges such as delays in powered shell deliveries and margin pressures, which may impact fourth-quarter results [12] - The company has walked away from the Core Scientific acquisition, maintaining a focus on its existing leased capacity of approximately 590 MW [11] - The stock has performed well, rallying 123.1% over the past year, outperforming the Zacks Internet Software industry, which saw a decline of 14.6% [13][15] Valuation Metrics - CRWV shares are currently trading at a Price/Book ratio of 8.89X, higher than the industry average of 5.03X, indicating potential risk [16]

Core Viewpoint - Meta Platforms is expanding its AI capabilities through a multi-year partnership with NVIDIA, aiming to enhance its data centers and improve user engagement across its platforms [2][3]. Group 1: AI Expansion and Infrastructure - The partnership with NVIDIA will support Meta's AI training and inference, allowing the company to build the world's largest personalization and recommendation systems for its 3.58 billion users [2][3]. - Meta is adopting NVIDIA Confidential Computing for WhatsApp and the Spectrum-X Ethernet networking platform to enhance its infrastructure [3]. Group 2: User Engagement and Advertising - The integration of AI is driving user and advertiser engagement across Meta's platforms, including Facebook, WhatsApp, Instagram, Messenger, and Threads [4]. - In Q4 2025, the number of daily active users generating media through Meta AI tripled year over year, indicating a significant boost in user engagement [5]. - Meta is testing a business assistant powered by Meta AI to help advertisers with campaign optimization and account support [5]. Group 3: Financial Outlook and Investment - Meta's capital spending for 2026 is projected to be between $115 billion and $135 billion, with a combined expected spending of $700 billion on AI infrastructure from major tech companies [7]. - The Zacks Consensus Estimate for 2026 earnings is $29.67 per share, reflecting a 26.3% growth from 2025, while revenues are expected to reach $247.15 billion, a 23% increase [11]. Group 4: Market Position and Valuation - Meta's shares have decreased by 7.4% over the past 12 months, underperforming the broader tech sector and competitors like Alphabet [9]. - The stock is currently considered overvalued with a forward price/sales ratio of 6.42X, compared to the industry average of 3.86X [10]. - Meta's Zacks Rank is 3 (Hold), suggesting that investors should wait for a more favorable entry point [14].

Key Takeaways SNOW reached a $100M AI revenue run rate a quarter ahead of expectations. Snowflake rolled out Semantic View Autopilot, Cortex tools, and real-time model deployment. SNOW faces Amazon and Oracle competition as shares fell 8.6% in 12 months. Snowflake (SNOW) is benefiting significantly from the growing adoption of enterprise AI, positioning itself as a key player in the ongoing AI revolution. With a $100 million AI revenue run rate achieved a quarter earlier than anticipated, Snowflake has demo ...

Core Insights - Meta Platforms (META) is enhancing its AI capabilities through a multi-year partnership with NVIDIA, aimed at building data centers optimized for AI training and inference, as well as improving its core business [1] - The integration of AI is expected to create the world's largest personalization and recommendation systems for META's 3.58 billion users [1] - META's AI strategy is driving user and advertiser engagement across its platforms, including Facebook, WhatsApp, Instagram, Messenger, and Threads [3] AI Integration and User Engagement - META's AI integration is expected to enhance user experience and engagement, with a significant increase in daily active users generating media, which tripled year over year in Q4 2025 [4] - The company is focusing on personalization through AI to better understand user interests and preferences, which is anticipated to improve content relevance across its platforms [4] - META is testing a business assistant powered by AI for advertisers, aimed at optimizing campaigns and providing account support [4] Advertising and Revenue Growth - The improved AI ranking system is benefiting META's advertising business, with a strong pipeline of ad opportunities on Threads and WhatsApp Status [5] - META plans to optimize ad formats and performance before increasing supply, leveraging its Andromeda ads retrieval engine across multiple platforms [5] - The consensus estimate for META's 2026 revenues is projected at $247.15 billion, indicating a 23% growth from 2025 [11] Capital Expenditure and Financial Outlook - META is planning significant capital expenditures between $115 billion and $135 billion in 2026, which may pressure free cash flow [6] - The company is expected to face challenges from a competitive advertising market and regulatory issues, which could impact its share price in the near term [6] - Operating expenses for 2026 are anticipated to be between $162 billion and $169 billion, potentially affecting earnings prospects [12] Stock Performance and Valuation - META shares have decreased by 7.4% over the past 12 months, underperforming the broader technology sector [7] - The current price-to-sales (P/S) ratio for META is 6.42, which is higher than the industry average of 3.86 [14] - META holds a Zacks Rank of 3 (Hold), suggesting that investors may want to wait for a more favorable entry point [15]

Core Insights - Datadog (DDOG) reported strong fourth-quarter 2025 results with revenues of $953.19 million, reflecting a 29% year-over-year growth, exceeding the Zacks Consensus Estimate by 4.22% [1] - Adjusted earnings per share were 59 cents, surpassing the consensus estimate by 7.27% [1] Financial Performance - The company achieved record bookings of $1.63 billion, marking a 37% annual increase [2] - For first-quarter 2026, management guided revenues between $951 million and $961 million, indicating a year-over-year growth of 25% to 26% [3] - Full-year 2026 revenue guidance is set at $4.06 billion to $4.10 billion, suggesting a growth deceleration to 18% to 20% compared to 28% growth in 2025 [3] - The Zacks Consensus Estimate for 2026 earnings is $2.27 per share, reflecting a 10.73% year-over-year increase [4] - Projected non-GAAP operating income for 2026 is between $840 million and $880 million, with non-GAAP earnings per share expected to be in the range of $2.08 to $2.16 [5] Operating Expenses and Margins - Datadog's non-GAAP operating margin was approximately 23.4% in the fourth quarter, but full-year net income declined to $107.74 million despite revenue growth [6] - The company continues to invest heavily in research and development, which may pressure operating margins in the near term [6] Competitive Landscape - Datadog faces increasing competition in the observability market, with established vendors like IBM and Dynatrace intensifying their efforts [12] - The company's forward 12-month price-to-sales (P/S) ratio is around 10.75x, significantly higher than the industry average of 4.02x, indicating that anticipated growth is already priced in [13] Conclusion - Despite a strong fourth-quarter performance, Datadog's decelerating growth guidance, rising expenses, and stretched valuation present challenges for investors [17]

Core Viewpoint - CoreWeave, Inc. (CRWV) has significantly outperformed the market, with a share price increase of 137.8% over the past year, contrasting with the Zacks Internet-Software Market's decline of 18.3% [1] Performance Comparison - CRWV has outperformed major competitors, including Microsoft (MSFT), which saw a decline of 1.2%, and Nebius Group N.V. (NBIS), which increased by 125.4% [2] Current Stock Status - CRWV is currently trading at $95.15, below its 52-week high of $187, indicating potential for future growth [3] Growth Drivers - The company's growth is driven by the increasing demand for specialized AI infrastructure, strategic partnerships, technological advantages, and strong long-term contracts [3][4] - CoreWeave has launched CoreWeave ARENA, enhancing AI performance for customers with over 2× faster performance and approximately 30% lower costs [4] Major Contracts - CoreWeave has secured multi-billion-dollar contracts, including a partnership with OpenAI worth up to $6.5 billion, raising total contracts with OpenAI to approximately $22.4 billion [5] - A significant cloud capacity deal with Meta Platforms valued at up to $14.2 billion through 2031 has also been established [5] Strategic Partnerships - A crucial factor in CoreWeave's growth is its relationship with NVIDIA Corporation (NVDA), which invested $2 billion to expand CoreWeave's data centers [6] - CoreWeave plans to integrate NVIDIA's Rubin technology into its AI cloud platform, positioning itself as a leader in AI infrastructure [6] Infrastructure Expansion - The company is aggressively scaling its data center network, deploying hundreds of thousands of GPUs and securing gigawatts of future capacity to meet rising AI demand [10] Acquisitions - CoreWeave is pursuing strategic acquisitions to enhance its AI platform, including the planned purchase of Monolith AI, although a proposed $9 billion acquisition of Core Scientific was terminated [11] Financial Guidance - Despite robust demand, CoreWeave has lowered its 2025 revenue guidance to $5.05–$5.15 billion due to supply chain constraints and delays [14] - The company anticipates capital expenditures (CapEx) of $12–$14 billion for 2025, reflecting increased financial pressure [13] Market Position - CoreWeave's estimates revisions are currently on a downward trend, with a 2.3% decrease in the Zacks Consensus Estimate for its earnings for 2025 over the past 60 days [16] - The company's shares are trading at a Price/Book ratio of 9.48X, higher than the Internet Software industry's 5.36X [18]

Core 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]

Core Insights - CoreWeave, Inc. (CRWV) has introduced CoreWeave ARENA, an evaluation environment that simulates real-world AI performance at production scale, providing a more comprehensive testing platform compared to traditional sandboxes [2][9] - Early users of ARENA have reported over 2× faster performance, approximately 30% lower costs, and up to 10× faster training compared to previous cloud setups [4][9] - CoreWeave has secured multi-billion-dollar contracts with major AI companies like Meta, OpenAI, and Microsoft, enhancing its revenue backlog and negotiating position [5] Product and Technology - ARENA allows customers to test workloads using AI-native technologies, supported by CoreWeave Mission Control for system visibility and insights into metrics and workload behavior [3] - The platform utilizes SUNK (Slurm on Kubernetes) and CKS (CoreWeave Kubernetes Service) specifically designed for AI workloads, addressing data bottlenecks with LOTA (Local Object Transport Accelerator) [3] Market Position and Competitiveness - In a competitive AI infrastructure market, ARENA differentiates CoreWeave and strengthens its revenue potential, as it can improve deal sizes and shorten sales cycles [5][9] - Competitors like Nebius Group N.V. are also expanding capacity to meet surging AI demand, with significant revenue targets set for the coming years [6] Financial Performance - CoreWeave's shares have increased by 142% over the past year, contrasting with a 19% decline in the Internet Software industry [8] - The company's shares are currently trading at a Price/Book ratio of 9.64X, higher than the industry average of 5.32X [10]