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The Zacks Computer-Software Industry continues to stand out this earnings season with many of the stocks in the space topping their bottom line expectations including tech giant Microsoft (MSFT). Accompanying Microsoft, 14 out of the 18 companies that have reported their quarterly results have surpassed earnings estimates so far.

Furthermore, several of these computer software stocks currently hold spots on the Zacks Rank #1 (Strong Buy) list, and here are three to consider.

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Cadence Design Systems (CDNS)

Cadence Design Systems' steady growth remains attractive as a provider of computational software, hardware, and IP that transforms design concepts into reality. The attractive growth narrative was reiterated with Q4 earnings of $1.38 per share beating estimates by 3% last Monday and soaring 44% from $0.96 a share in the comparative quarter.

Annual earnings increased 20% in fiscal 2023 to $5.15 per share with total sales of $4.09 billion rising 15%. Artificial intelligence and 3D integrated circuits (ICs) should give the company a boost going forward regarding performance improvements and reduced power consumption. Correlating with such, Cadence Design Systems is projected to post double-digit top and bottom-line growth in FY24 and FY25.

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Manhattan Associates (MANH)

With its software geared to supply chain execution and optimization solutions, Manhattan Associates is a stock to watch after the pandemic showed flaws in this area of inception within many countries including the United States.

Manhattan Associates is now thought to have over 1,200 customers worldwide extending to diverse industries including retail, grocery, consumer packaged goods, healthcare, and automotive markets. The omnichannel commerce solutions provider has seen strong momentum reporting record Q4 revenue of $238.26 million in late January. More impressive, Q4 earnings of $1.03 per share surpassed estimates by 29% and climbed 27% from $0.81 per share a year ago. It’s also noteworthy that Manhattan Associates has now topped the Zacks EPS Consensus for a remarkable 24 consecutive quarters and has posted an average earnings surprise of 27.6% in its last four quarterly reports.

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Manhattan Associates annual earnings soared 35% to $3.74 per share last year with FY24 earnings expected to be virtually flat. However, FY25 EPS is projected to jump 15% to $4.33 per share and double-digit sales growth is further reason to believe in Manhattan Associates' earnings potential as well. 

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Pegasystems (PEGA)

CRM software provider Pegasystems is certainly worthy of investors' consideration after Q4 earnings of $1.77 per share crushed estimates of $1.07 a share by 65% last Wednesday. Even better, Q4 earnings soared 116% from $0.82 a share in the prior-year quarter. Annual EPS of $2.48 was a company record which Pegasystems attributed to its strong cash flow growth.

Looking forward, earnings are expected to be up roughly 1% in FY24 and then climb 19% in FY25 to $2.99 per share. Interestingly enough, Pegasystems’ stock has been one of the best performers so far this year spiking +29% to largely outperform the broader indexes, the Zacks Computer-Software Market’s +6%, and fellow CRM software leader Salesforce’s (CRM) +8%.

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Bottom Line

The increased profitability of these computer software companies is very enticing at the moment. Attributing to their strong buy ratings, earnings estimate revisions have continued to rise for their current FY24 and FY25 making now an ideal time to buy Cadence Design Systems, Manhattan Associates, and Pegasystems stock.

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