As the earnings season approaches, Mizuho's industry research report indicates that the U.S. software sector is likely to achieve better-than-expected growth in the third quarter. "Our overall survey results for Q3 are quite solid," stated Mizuho's analyst team led by Gregg Moskowitz in a comprehensive investor report. "The performance of public cloud/consumer data has been impressive, and the adoption of artificial intelligence continues to maintain robust momentum. The demand for cybersecurity remains strong, although some reports indicate delays in transaction processes. Finally, the Software as a Service (SaaS) sector has demonstrated resilience, with improvements noted in one or two sub-segments."

As we enter the earnings season, Mizuho identifies several software companies that are expected to perform strongest, all receiving an “Outperform” rating: - Microsoft (MSFT.US): Price target raised from $625 to $640; - Datadog (DDOG.US): Price target raised from $155 to $170; - Palo Alto Networks (PANW.US): Price target raised from $210 to $220; - CyberArk (CYBR.US): Currently in acquisition talks with Palo Alto, price target raised from $500 to $520.

Additionally, Mizuho anticipates that Atlassian (TEAM.US) will report solid performance, with a current price target of $235, also rated “Outperform.” Moskowitz noted, "Our expectation for the industry's Q3 revenue is a sequential median growth of approximately 3% and a year-over-year increase of 18%. Compared to the strong sequential growth rates of the past two Q3s, this is just about 3 percentage points lower. In terms of currency, the dollar has depreciated by 3 basis points against the euro and 1 basis point against the pound quarter-over-quarter; however, most of the currency fluctuations occurred before management provided earnings guidance. Therefore, we expect only a slight additional tailwind from currency effects in Q3. Overall, we anticipate that industry average revenue will likely exceed our latest expectations.” He added, "Our survey results for Atlassian this quarter have improved, including slight enhancements in their cloud migration activities. We are optimistic that the company can deliver solid performance in the first quarter of the fiscal year 2025 (F1Q). Our survey results for Microsoft Azure are very favorable, and we expect Azure's year-over-year growth rate (at constant currency) to exceed the company's guidance of approximately 37%."