Internet Stocks: Benefiting from AI and Digital Transformation
The current surge in digitalization is significantly impacting Internet stocks, particularly with the rapid adoption of artificial intelligence (AI) and cloud solutions. The growing rollout of 5G technology, featuring high-speed data transmission and low latency, enhances AI performance by allowing systems to process extensive datasets instantaneously. This trend is amplifying the use of social media, digital marketing, e-commerce, and online delivery, despite various macroeconomic challenges such as fluctuating tariffs and subdued consumer spending.
As we enter the earnings reporting season, several Internet enterprises are geared up to disclose their financial results. Among them, we highlight four promising stocks: Globant (GLOB), NICE (NICE), Affirm Holdings (AFRM), and BILL Holdings (BILL), all of which hold potential for exceeding earnings forecasts.
Internet Stocks Fuelled by AI Growth
The accelerated adoption of AI and cloud computing is fostering a cost-effective, swift deployment of innovative Internet services. With AI integration, these services enjoy enhanced personalization, refined ad targeting, and increased operational efficiency. Major tech companies like Meta Platforms, Microsoft, Alphabet, and Amazon are significantly investing in AI infrastructures to drive these advancements.
For instance, Meta Platforms recently revealed the advantages of its AI-driven systems across its platforms including Facebook, WhatsApp, and Instagram. The company observed a nearly 5% rise in ad conversions on Instagram and about 3% on Facebook, thanks to a new AI recommendation model. Their capital expenditures for 2025 are projected to be between $66 billion and $72 billion.
Microsoft’s AI tools, which include the Microsoft 365 Copilot for businesses and the consumer-focused Copilot on Windows, boast an impressive 100 million monthly active users, as per their fiscal fourth-quarter 2025 report. Meanwhile, Alphabet is actively incorporating AI into its search functionalities, which enhances user experience and improves advertising metrics. The tech giant anticipates a capital expenditure of around $85 billion for 2025, reflecting its commitment to AI.
Amazon, aiming to invest over $100 billion in building its AI capabilities, reported a 23% growth year-over-year in its advertising division, driven by strategies leveraging AI to optimize its advertising operations.
How to Choose Stocks Likely to Surpass Earnings Predictions
Identifying technology stocks that might exceed earnings expectations can be challenging. However, utilizing a streamlined methodology simplifies this process.
Narrow your selection to stocks that carry a Zacks Rank of #1 (Strong Buy), #2 (Buy), or #3 (Hold) coupled with a positive Earnings ESP. Our Earnings ESP Filter aids in pinpointing the best stocks to consider before earnings releases.
Earnings ESP is an exclusive method for gauging stocks that are likely to surprise positively in their next earnings announcement, calculated as the percentage difference between the Most Accurate Estimate and the Zacks Consensus Estimate. Our analyses show that stocks fitting this profile have a probability of a positive earnings surprise reaching as high as 70%.
Noteworthy Candidates
Globant, based in Luxembourg, features an Earnings ESP of +0.11% alongside a Zacks Rank of 2. Scheduled to release its second-quarter 2025 earnings on August 14, the company anticipates revenues of at least $612 million, reflecting a 4.2% year-on-year increase. With a strategic focus on AI industry studios and sound pricing tactics, Globant aims to navigate a challenging economic climate while driving its growth.
NICE, headquartered in Israel, currently holds an Earnings ESP of +0.88% and a Zacks Rank of 3. The company is also set to announce its second-quarter 2025 results on August 14. NICE is witnessing benefits from robust cloud operations and expanding customer outreach, with expected non-GAAP revenues between $709 million and $719 million, yielding a 7% growth year-over-year.
Meanwhile, Affirm Holdings, located in San Francisco, is anticipated to unveil its fourth-quarter fiscal 2025 earnings on August 28, showcasing an Earnings ESP of +19.25%. The company is benefitting from rising gross merchandise volume (GMV) and the adoption of Affirm Cards, forecasting GMV to lie between $9.4 billion and $9.7 billion for the quarter.
Lastly, BILL Holdings, situated in San Jose, gears up to report its fourth-quarter fiscal 2025 earnings on August 27 with an Earnings ESP of +4.48% and a Zacks Rank of 3. The company expects to achieve between $370.5 million and $380.5 million in revenues, benefiting from a growing small and medium-sized business clientele.
These stocks illustrate the dynamic intersection of AI advancements and the Internet, showcasing their potential to not only weather economic uncertainties but also achieve substantial growth in their respective sectors.
