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]

Core Insights - The artificial intelligence (AI) infrastructure segment is expected to maintain strong momentum in 2026, driven by robust demand, despite concerns over the high valuations of major AI companies [2][3]. Company Summaries Calix Inc. (CALX) - Calix reported adjusted earnings of $0.39 per share for Q4 2025, exceeding the Zacks Consensus Estimate of $0.38, and significantly up from $0.08 per share a year ago [4]. - Quarterly revenues reached $272.45 million, surpassing the Zacks Consensus Estimate by 0.90% [4]. - The company has integrated AI into its cloud platform to enhance operations and service delivery for broadband providers, with major clients including Lumen Technologies and Verizon [6]. - Calix's expected revenue and earnings growth rates for the current year are 15.6% and 41.5%, respectively, with a 4.9% improvement in the earnings estimate over the last 30 days [7]. Teradata Corp. (TDC) - Teradata reported adjusted earnings of $0.74 per share for Q4 2025, beating the Zacks Consensus Estimate of $0.55, and up from $0.53 per share a year ago [8]. - Total revenues were $421 million, exceeding the Zacks Consensus Estimate by 6.52% [8]. - The company is expected to benefit from improved annual recurring revenue (ARR) growth, cost savings, and productivity measures, which will drive free cash flow [9]. - Teradata's innovative AI capabilities and new product rollouts are anticipated to enhance its analytics offerings and drive long-term growth [10][12]. - The expected revenue and earnings growth rates for Teradata are -2.1% and -3.9%, respectively, with a 0.4% improvement in the earnings estimate over the last 90 days [13]. Lumen Technologies Inc. (LUMN) - Lumen reported adjusted earnings of $0.23 per share for Q4 2025, contrasting with a loss of $0.21 per share as per the Zacks Consensus Estimate, and an adjusted loss of $0.09 per share in the prior year [14]. - Total revenues were $3.041 billion, down 8.7% year over year, and missed the Zacks Consensus Estimate by 1.4% [14]. - The company is focusing on AI-driven solutions, securing $13 billion in Private Connectivity Fabric (PCF) deals by the end of 2025, with revenues of $41 million and $116 million recognized in Q4 and full-year 2025, respectively [15][16]. - Lumen's active customers for its network-as-a-service (NaaS) platform grew by 29% quarter over quarter, indicating strong demand for its services [17]. - The expected revenue and earnings growth rates for Lumen are -12.4% and 15.4%, respectively, with a significant improvement in the earnings estimate of over 100% in the last seven days [18].

Industry Overview - The momentum of the artificial intelligence (AI) infrastructure segment is expected to continue into 2026, supported by a bullish demand scenario [1] - Concerns exist regarding the overstretched valuations of major AI companies, including both infrastructure developers and application implementers [1] Company Highlights Calix Inc. (CALX) - Calix reported quarterly adjusted earnings of $0.39 per share, surpassing the Zacks Consensus Estimate of $0.38, and showing significant growth from $0.08 per share a year ago [6] - Quarterly revenues reached $272.45 million, exceeding the Zacks Consensus Estimate by 0.90% [6] - The company has integrated AI into its cloud platform to enhance operations and service delivery for broadband service providers [8] - Expected revenue and earnings growth rates for Calix are 15.6% and 41.5%, respectively, for the current year [9] Teradata Corp. (TDC) - Teradata reported quarterly adjusted earnings of $0.74 per share, beating the Zacks Consensus Estimate of $0.55, and up from $0.53 per share a year ago [11] - Total revenues were $421 million, exceeding the Zacks Consensus Estimate by 6.52% [11] - The company is expected to benefit from improved annual recurring revenue (ARR) growth, cost savings, and productivity measures [12] - Teradata's expected revenue and earnings growth rates are -2.1% and -3.9%, respectively, for the current year [16] Lumen Technologies Inc. (LUMN) - Lumen reported fourth-quarter adjusted earnings of $0.23 per share, contrasting with a Zacks Consensus Estimate of a loss of $0.21 [17] - Total revenues were $3.041 billion, down 8.7% year over year, and missed the Zacks Consensus Estimate by 1.4% [17] - The company secured $13 billion in AI-linked Private Connectivity Fabric (PCF) deals, boosting demand for its network-as-a-service (NaaS) solutions [18][19] - Lumen's expected revenue and earnings growth rates are -12.4% and 15.4%, respectively, for the current year [21]

Core Insights - Calix Inc. has launched the next generation of Calix Engagement Cloud on the Calix Platform, enhancing service providers' ability to deliver personalized offers to residential and business subscribers [1] - The new features of Engagement Cloud enable providers to target the right subscribers more efficiently and launch personalized campaigns aimed at increasing customer lifetime value (CLV) and average revenue [1] Company Developments - The latest enhancements to the Engagement Cloud provide a faster and clearer method for service providers to engage with subscribers [1] - The focus on personalized campaigns is expected to drive growth in customer lifetime value and average revenue for service providers [1]

Core Insights - Calix (CALX) is set to announce its fourth-quarter 2025 results on January 28, 2026, with anticipated non-GAAP revenues between $267 million and $273 million, reflecting a 2% sequential increase and 20% year-over-year growth [1] - The Zacks Consensus Estimate for fourth-quarter earnings remains steady at $0.38 per share, indicating a significant 375% year-over-year increase, while the revenue consensus is pegged at $270.03 million, representing a 31.01% year-over-year growth [2] Group 1: Financial Performance Expectations - Calix's fourth-quarter performance is expected to benefit from strong customer demand, following record revenues in the third quarter of 2025, with a projected non-GAAP gross margin increase to 57.75% [4] - The company added 20 new customers in the third quarter of 2025, which is expected to contribute to revenue growth in the upcoming quarter as these customers begin deploying Calix solutions [5] - Calix's remaining performance obligations (RPOs) grew 2% sequentially to $355 million and increased 20% year-over-year, indicating strong demand for its cloud platform services [6] Group 2: Strategic Initiatives and Investments - Investments in AI are anticipated to significantly impact Calix's fourth-quarter performance, with new AI features aimed at simplifying operations and enhancing customer satisfaction [7] - The company has a strong balance sheet with record cash and investments of $340 million, supporting ongoing investments in AI and international expansion [8] Group 3: Earnings Guidance and Market Position - Calix expects sequential revenue growth driven by strong demand, new customers, and rising gross margins, with non-GAAP EPS guidance between $0.35 and $0.41 [10] - The company currently has an Earnings ESP of 0.00% and a Zacks Rank of 1 (Strong Buy), indicating a favorable outlook for potential earnings performance [11]

Industry Overview - The AI-driven bull run that began in 2023 and 2024 has continued into 2025, with strong momentum in the AI infrastructure segment [2] - The demand for AI infrastructure remains robust, supported by a bullish market scenario [2] Capital Expenditure Trends - Four of the "magnificent 7" stocks are set to invest $380 billion in 2025 for AI infrastructure development, representing a 54% year-over-year increase in capital spending [3] - Projections indicate that AI infrastructure capital expenditure will exceed $1 trillion by 2028, with estimates reaching a cumulative total of $5 trillion by 2030 [4] Investment Recommendations - Five small and mid-cap stocks are highlighted as potential beneficiaries of the AI boom in 2026: Calix Inc. (CALX), Qualys Inc. (QLYS), Innodata Inc. (INOD), Five9 Inc. (FIVN), and UiPath Inc. (PATH) [5][10] Company Profiles Calix Inc. (CALX) - CALX provides cloud and software platforms for communications service providers, integrating AI to enhance operations and subscriber engagement [8][9] - Expected revenue and earnings growth rates for CALX are 12.4% and 35.3%, respectively, for the next year [11] Qualys Inc. (QLYS) - QLYS specializes in cloud-based cybersecurity solutions, benefiting from increased demand amid rising cyber threats [12][15] - The company has a projected revenue growth rate of 7.7% and earnings growth of 6.5% for the next year [16] Innodata Inc. (INOD) - INOD plays a crucial role in the AI ecosystem by providing high-quality data for training language models, with expected revenue and earnings growth rates of 24.1% and 35.6%, respectively [18][21] - The company supports five of the seven major hyperscalers and is expanding its capabilities in AI services [19][20] Five9 Inc. (FIVN) - FIVN offers intelligent cloud software for contact centers, with a focus on AI-driven solutions that enhance customer interactions [22][25] - The expected revenue and earnings growth rates for FIVN are 9.5% and 8.3%, respectively, for the next year [26] UiPath Inc. (PATH) - PATH provides a robotic process automation platform that leverages AI to streamline operations, with new generative AI features enhancing its offerings [27][28] - The company anticipates revenue and earnings growth rates of 9.3% and 14.2%, respectively, for the next year [30]

Industry Overview - The artificial intelligence (AI) infrastructure segment is experiencing significant momentum, driven by a bullish demand scenario, which is expected to transform the world over the next five years [2]. Company Summaries Innodata Inc. (INOD) - Innodata is positioned as a key partner in the AI revolution, providing essential data for training advanced language models, with a long-term growth outlook supported by major tech companies and diverse customer bases [6][7]. - The company has launched a GenAI Test and Evaluation Platform to validate large language models, enhancing its capabilities in AI data and integration [8][10]. - Innodata's expected revenue and earnings growth rates for the next year are 24.1% and 35.6%, respectively, with a Zacks Consensus Estimate for earnings improving by 1.7% over the last 30 days [11]. Calix Inc. (CALX) - Calix provides cloud and software platforms for communication service providers, integrating AI to enhance operations and subscriber engagement [13][14]. - The company has an expected revenue growth rate of 12.4% and an earnings growth rate of 35.3% for the next year, with the Zacks Consensus Estimate for earnings improving by 8.3% over the last 60 days [14]. Five9 Inc. (FIVN) - Five9 specializes in contact center software solutions, benefiting from increased subscription revenues and the adoption of AI tools in its services [16][19]. - The company has an expected revenue and earnings growth rate of 9.7% and 8.3%, respectively, for the next year, with the Zacks Consensus Estimate for earnings improving by 1.3% over the last 30 days [21].