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2 Network Software Stocks to Watch From a Challenging Industry

The Zacks Communication-Network Software industry continues to face execution and timing challenges despite healthy underlying demand. A key constraint is the lengthening sales cycle for larger software opportunities. As operators transition their networks to newer architectures, customers are delaying network upgrades by one or two quarters while deciding which technology and upgrade path to pursue. This is creating near-term revenue timing uncertainty even though the broader upgrade cycle remains intact. Nevertheless, industry players like Vistance Networks VISN and Genasys GNSS are gaining from the ongoing digitalization efforts, including a shift to cloud computing. Expansion of virtualization and cloud-native networking is driving prospects. AI-enabled network management and next-generation communication platforms are beginning to gain commercial traction. The strong demand for network security benefits industry participants, as a secure environment is required to run cloud-based applications.

Industry Description

The Zacks Communication-Network Software industry comprises companies that provide software solutions supporting cloud, on-premise and hybrid environments, communication technology solutions, including broadband and Voice Over Internet Protocol, digital communication services delivered as software-as-a-service and telecom solutions, supporting the proliferation and the deployment of 5G and 6G networks, drone technology and protective communications software. There are a few companies that offer solutions based on the Open Radio Access Network standard. Others offer wireless connectivity solutions for mission-critical Industrial Internet applications and services. Solutions from these companies support a variety of industries, including telecommunications, technology, industrial, government, retail, financial, gaming and education.

3 Trends Shaping the Future of the Communication-Network Software Industry

Increased Adoption of Cloud-based Solutions: Rapid digitalization, driven by the disruption caused by the pandemic, has increased the demand for cloud-based applications, virtualized software and container-based software. Applications are being developed in the cloud, which is creating opportunities and, at the same time, challenges for industry participants in terms of performance and security. Rising cyberattacks, including Distributed Denial of Service attacks and attacks using malware through Transport Layer Security and Secure Sockets Layer protocols, are redefining the cyber threat landscape. Enterprises are spending more on cloud-based security solutions. Moreover, the software-defined approach is increasingly preferred over legacy hardware-centric models due to the need for agility.

Growing Importance of Automation Tools: The ongoing rapid transition to the cloud has increased the importance of automation tools. Enterprises are adopting automated tools to deploy and operate security and application services. This is improving performance monitoring and detection, reporting security anomalies and reducing overall costs.

Rapid Evolution of 5G and 6G Networks: Industry participants are benefiting from a continued rise in demand for data-intensive bandwidth and the need for reduced latency associated with smartphones, tablets and machine-to-machine communication. The proliferation of data centers, big data, cloud-based services, streaming media content and IoT are key catalysts. The rapid deployment of 5G networks is creating a massive growth opportunity for telecom providers who are using solutions provided by industry participants.

Zacks Industry Rank Indicates Dim Prospects

The Zacks Communication-Network Software industry is housed within the broader Zacks Computer and Technology sector. It carries a Zacks Industry Rank #203, which places it in the bottom 17% of more than 245 Zacks industries.

The group’s Zacks Industry Rank, which is the average of the Zacks Rank of all the member stocks, indicates bearish near-term prospects. Our research shows that the top 50% of the Zacks-ranked industries outperform the bottom 50% by a factor of more than two to one.

The industry’s positioning in the bottom 50% of the Zacks-ranked industries is a result of the negative earnings outlook for the constituent companies in aggregate. Looking at the aggregate earnings estimate revisions, it appears that analysts are pessimistic about this group’s earnings growth potential. Since Dec. 31, 2025, the industry’s earnings estimates for the current year have moved 40.7% north.

Given the dull prospects, there are only a few stocks worth watching in this challenging industry. But, before we present these stocks, it is worth looking at the industry’s shareholder returns and current valuation first.

Industry Beat Sector and S&P 500

The Zacks Communication-Network Software industry has underperformed the Zacks S&P 500 composite and broader sector in the past year.

The industry has plunged 33.5% over this period compared with the Zacks Computer and Technology sector’s return of 30.7% and the S&P 500’s appreciation of 24.2%.

One-Year Price Performance

Industry's Current Valuation

On the basis of forward 12-month P/S, a commonly used multiple for valuing network software companies, we see that the industry is currently trading at 0.74X compared with the S&P 500’s 5.03X and the sector’s 6.79X.

Over the past five years, the industry has traded as high as 1.21X and as low as 0.06X, with the median being 0.23X, as the charts below show.

Price/Sales Ratio (F12M)

2 Stocks to Watch Right Now

Vistance Networks: This Zacks Rank #3 (Hold) company is a global provider of intelligent network solutions for access networks and enterprise networks.

Vistance’s strong exposure to the DOCSIS 4.0 investment cycle and a significantly improved balance sheet are offset by near-term earnings and execution pressures. Aurora remains well positioned for network upgrades, with DOCSIS 4.0 products accounting for roughly 70% of the business and expected to grow over the next several years.

Shares of Vistance have dropped 43.1% year to date. The Zacks Consensus Estimate for VISN’s 2026 earnings has been steady at $1.22 per share over the past 30 days.

Price and Consensus: VISN

Genasys: This Zacks Rank #3 company is showing meaningful operational improvement, but the software business has yet to demonstrate the growth needed to justify a more aggressive stance. Larger software deals carry longer sales cycles, limiting near-term visibility into when pipeline opportunities will translate into revenue. Genasys is suffering from this trend.

Shares of Genasys have declined 15.6% year to date. The Zacks Consensus Estimate for GNSS’ 2026 earnings has been steady at 4 cents per share over the past 30 days.

Price and Consensus: GNSS

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Vistance Networks, Inc. (VISN): Free Stock Analysis Report

Genasys Inc. (GNSS): Free Stock Analysis Report

This article originally published on Zacks Investment Research (zacks.com).

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