This high-growth software stock is profitable in 2024

We recently compiled a list of the 8 High-Growth Software Stocks That Are Profitable in 2024. In this article, we’ll take a look at where Zoom Video Communications Inc. (NASDAQ:ZM) stands compared to the other high-growth software stocks.

The Software Industry: An Analysis

The software market is witnessing robust growth driven by various trends and technological advancements. According to Precedence Research, the global software market reached $659.17 billion in 2023. Looking forward, the market is expected to grow at a compound annual growth rate (CAGR) of 11.8% between 2024 and 2034, reaching $2.24 trillion by the end of the forecast period. In 2023, the North American region led the software market with a significant share of 44%. Significant growth is expected for the Asia-Pacific region during the forecast period.

A key influencing factor for the market is the rise of artificial intelligence (AI). AI technologies are being integrated into software solutions to increase efficiency and automate repetitive tasks. A study from Salesforce shows that 85% of IT leaders expect AI to increase developer productivity in the next three years. This expectation underscores the growing recognition of AI’s role in streamlining workflows and optimizing software performance.

Another significant trend is the shift towards cloud-based software. Because of their flexibility, scalability and cost-effectiveness, companies are migrating from traditional on-premises solutions to cloud services. This transition allows businesses to access applications remotely and across devices, which is critical in today’s digital landscape.

The 2024 AlgoSec State of Network Security report highlights a notable shift toward multi-cloud environments. The study is based on surveys conducted in the second half of 2022 and 2023 and evaluated key players such as AWS and Microsoft Azure. It shows that security, continuity and compliance are key factors driving companies to adopt cloud platforms. While cloud adoption increases, Azure remains the most popular platform, with AWS quickly gaining ground.

The report also shows that the shift to remote work has significantly accelerated the deployment of Software-Defined Wide Area Networks (SD-WAN), increasing the share of organizations without SD-WAN from 55.2% in 2022 to 34% in year 2023 fell. Secure Access Service Edge (SASE) has become a popular solution for businesses by consolidating security capabilities into a unified cloud service. Additionally, firewall implementation has increased significantly: only 7.1% of respondents reported no firewalls in 2023, compared to 28.4% in 2022. This trend reflects a growing focus on securing cloud Networks from external threats.

With an overview of the global software market in mind, let’s take a look at the 8 high-growth software stocks that are profitable in 2024.

methodology

To compile our list of 8 high-growth software stocks that are profitable in 2024, we used stock screeners from Finviz and Yahoo Finance. We sorted our results by market capitalization and selected the 50 largest software companies by market capitalization.

To narrow our list to high-growth software stocks, we focused on companies whose compound annual growth rate (CAGR) in net sales exceeded 18% over the past five years.

Next we focused on profitability. From this initial list of high-growth software stocks, we narrowed our picks to stocks that had positive net income after twelve months (TTM) and stocks that had positive net income growth over the past five years.

To ensure the reliability of our results, we consulted reputable sources such as SeekingAlpha, which provided insights into net income CAGR and sales CAGR over the last five years, and YCharts, which provided information on TTM net income.

Finally, from this list of high-growth software stocks that met our criteria, we focused on the eight stocks that are most popular with institutional investors. Data on hedge fund sentiment around each stock comes from Insider Monkey’s database of 912 elite hedge funds. The 8 high-growth software stocks that are profitable in 2024 are listed below in ascending order based on the number of hedge funds that own shares in them in the second quarter of 2024.

Why do we care what hedge funds do? The reason is simple: Our research shows that we can outperform the market by mimicking the top stock picks of the best hedge funds. Our quarterly newsletter strategy selects 14 small-cap and large-cap stocks each quarter and has returned 275% since May 2014, outperforming the benchmark by 150 percentage points (Further details can be found here).

A close-up of a hand using a laptop to control an immersive video meeting.

Zoom Video Communications Inc. (NASDAQ:ZM)

TTM Net Income: $875.37 million

5-Year Net Income CAGR: 132.61%

5-year revenue CAGR: 58.14%

Number of hedge fund owners: 39

Zoom Video Communications Inc. (NASDAQ:ZM) is a software and communications technology company best known for its video conferencing application Zoom. The company recently launched Zoom Workplace, an AI-powered collaboration platform designed to improve modern work environments. This platform aims to streamline communication, increase employee engagement, and improve productivity by integrating various tools such as meetings, team chat, and phone services into a single interface.

The company is actively expanding its offering. Recently, Zoom Video Communications Inc. (NASDAQ:ZM) launched a new Zoom webinar feature that can accommodate up to 1 million participants. This revolutionizes the way companies can engage with large audiences and demonstrates the clear scalability advantage.

Additionally, Zoom Video Communications Inc. (NASDAQ:ZM) is seeing a surge in adoption of its advanced contact center packages as companies increasingly leverage its AI capabilities to improve agent performance. Notably, all of the company’s top 10 contact center wins in the second quarter of 2025 involved ousting competitors. This success underscores how well Zoom’s offerings meet customer needs and validates its strategy to provide integrated customer and employee experience solutions.

As Zoom continues to expand its capabilities, it prepares to enter the next phase of AI-powered work, where AI Companion simplifies workflows, provides contextual insights, and performs tasks to further streamline operations.

At the end of the second quarter of fiscal 2025, Zoom Video Communications Inc. (NASDAQ:ZM) had 3,933 customers who generated over $100,000 in revenue over the trailing 12 months, up 7.1% from the same period last year . The company reported total revenue of $1.16 billion for the quarter, up 2.1% year over year. Company revenue reached $682.8 million, up 3.5% year over year. Additionally, operating cash flow improved significantly and amounted to $449.3 million, an increase of 33.7% compared to the prior-year quarter.

As one of the most profitable high-growth stocks, Zoom Video Communications Inc. (NASDAQ:ZM) has managed to grow its revenue at a compound annual growth rate (CAGR) of 58.14% over the past five years, while its net profit also increased in the same period with a CAGR of 132.61%.

Zoom Video Communications Inc. (NASDAQ:ZM) stands out as an attractive investment opportunity due to its continued innovation and impressive financial results.

Total ZM takes 10th place on our list of high-growth software stocks that are profitable in 2024. While we recognize ZM’s potential as an investment, we believe AI stocks are more promising to deliver higher returns, within a shorter time frame. If you’re looking for an AI stock that’s more promising than ZM but trades at less than 5x earnings, check out our report on it cheapest AI stock.

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Disclosure: None. This article was originally published on Insider Monkey.