The Zacks Computer Software industry participants are well-positioned to benefit from the accelerated digital transformation drive globally. The shift to cloud and the rise of SaaS (Software-as-a-Service) models offer recurring revenue visibility for vendors while offering flexibility and scalability for users. The industry growth is also being fueled by the proliferation of artificial intelligence (AI) and machine learning (ML). The cutting-edge technologies are being integrated into enterprise and consumer applications. Software vendors are increasingly embedding generative AI into productivity tools, customer service platforms, and enterprise resource planning systems.
According to a Grand View Research report, the global software market is expected to witness a CAGR of 11.3% from 2025 to 2030 and reach 1,397.31 billion. These trends augur well for industry participants, such as Microsoft Corporation MSFT, PTC Inc PTC and Manhattan Associates MANH. Uncertainty prevailing over global macroeconomic conditions and stiff competition continues to be concerning for the participants.
Industry Description
The Zacks Computer Software industry includes companies that provide software applications related to AI, cloud computing, electronic design automation (primarily for semiconductor and electronics industries), digital media and marketing, customer relationship management, on-premises and cloud-based database management, accounting and tax purposes, human capital management, cybersecurity and application performance monitoring and cloud-based enterprise communications platform. Some companies develop and market simulation software (like computer-aided design or CAD, 3D modeling, product lifecycle management or PLM, data orchestration and experience creation), which engineers, designers and researchers use across various industries like architecture, engineering and construction, product design, manufacturing and digital media.
3 Trends Shaping the Future of the Software Industry
Higher Spending on AI and Cloud: The industry's prospects are bright, given higher spending by enterprises on the latest software upgrades. The continued investment in AI, big data and analytics and the ongoing adoption of SaaS open up opportunities for these players. Going ahead, AI and ML tech are expected to be widely integrated into the software tools. This increasing demand for AI-powered software tools for automation, personalization, predictive analytics and decision-making augurs well.
Further, cloud computing will continue to be a dominant force in the software industry, with businesses adopting hybrid and multi-cloud environments to meet their growing needs for flexibility and scalability. Cloud offers a flexible and cost-effective platform for developing and testing applications. The deployment time is also shorter compared with legacy systems. SaaS companies are expected to register strong top-line growth on a higher percentage of recurring revenues, subscription gross margin and a lower churn rate.
Increased Cybersecurity Focus: The increasing need to secure cloud platforms amid growing cyberattacks and hacking incidents drives demand for cybersecurity software. As software becomes more interconnected, cloud-native and AI-powered, it is driving the demand for performance management monitoring tools that are scalable and suitable for cloud-based environments. Zero-trust architectures, identity and access management and real-time threat detection underpinned by AI are becoming key features of next-gen software platforms.
Macroeconomic Headwinds a Concern: Global macroeconomic weakness and volatile supply chain dynamics are persistent concerns. Though tariff troubles are unlikely to affect the software industry directly, higher tariffs on hardware would lead to higher costs. This would affect the software pricing as well. Inflation could affect spending across small and medium-sized businesses globally. The uncertainty in business visibility could dent the industry's performance in the near term. According to a report from Gartner, worldwide IT spending is now projected to reach $5.43 trillion in 2025, calling for an increase of 7.9% from 2024 levels. This is below its January forecast of 9.8% growth. The research firm added that spending on software and services will slow down due to this global uncertainty, but AI-related infrastructure spending will continue to increase.