Barclays Identifies Top Software Stocks Ahead of Earnings, Citing Growth Drivers in Cybersecurity

Barclays analysts have identified their top picks in the U.S. software sector ahead of quarterly earnings reports, highlighting favorable setups for several cybersecurity and specialized software companies. In a research note previewing 14 companies, the investment bank pointed to positive catalysts for Cloudflare, Varonis Systems, and CCC Intelligent Solutions, while urging a more cautious stance on others.

Favorable Setups Highlighted

Barclays sees the most attractive risk/reward profile for Cloudflare (NET), citing higher request volumes driven by non-human traffic that should translate into revenue growth. The firm noted that Cloudflare's market share in reverse proxy services has accelerated, with the company now fronting approximately 24% of the internet. Analysts expect the company to report around 31% growth in current remaining performance obligations (cRPO) and 30% revenue growth for the second quarter.

Varonis Systems (VRNS) was also named a top pick, with Barclays seeing potential for the company to beat estimates for its Software-as-a-Service (SaaS) annual recurring revenue (ARR). The bank believes the fundamental outlook for Varonis is attractive into fiscal 2027 as year-over-year comparisons ease in the second half of this year.

For CCC Intelligent Solutions (CCCS), analysts pointed to positive trends as headwinds from industry claim volumes continue to normalize. The firm also noted that two significant new customer wins are expected to begin contributing to revenue in the second half of the year, supporting a positive outlook.

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Analysts Urge Caution on Others

Barclays advised investors to watch Check Point Software (CHKP), suggesting a meaningful catalyst for the stock may still be several quarters away. The note cited mixed channel checks and go-to-market disruptions that are expected to weigh on second-quarter billings, along with a difficult comparison for the upcoming third quarter.

Regarding Tenable Holdings (TENB), analysts believe their estimates for 7% year-over-year growth in billings and revenue are beatable. However, they questioned whether a modest beat would be enough to drive the stock higher, given its 85% gain during the quarter, which significantly outpaced the 9% rise in the iShares Expanded Tech-Software Sector ETF (IGV).