These 2 Tech Stocks May Outperform Earnings: Why They Matter to You

Understanding Earnings Surprises and Their Impact on the Stock Market

Investors often look to quarterly reports as a key indicator of a company’s performance. These reports provide valuable insights into financial health, future prospects, and overall market sentiment. Among the many figures reported, earnings stand out as one of the most closely watched metrics. This is because earnings are a direct reflection of a company's ability to generate profit, which can significantly influence stock prices.

Life and the stock market both revolve around expectations. When a company exceeds its earnings forecast, it often leads to positive reactions from investors, sometimes resulting in higher stock prices. Conversely, if a company falls short of expectations, it can lead to negative consequences, such as a drop in share value. For investors seeking to maximize returns, identifying stocks that are likely to beat their earnings estimates can be a strategic move.

One popular approach is to search for "earnings whispers" or companies that may surprise the market with better-than-expected results. While this practice is common, it can be challenging. Fortunately, tools like the Zacks Earnings ESP (Expected Surprise Prediction) offer a more systematic way to identify potential winners.

How the Zacks Earnings ESP Works

The Zacks Earnings ESP is designed to predict earnings surprises by analyzing recent analyst revisions. The underlying idea is that when an analyst updates their earnings estimate before a report, it often indicates they have new information that could improve the accuracy of their prediction.

The calculation of the ESP involves comparing the Most Accurate Estimate (which reflects the latest analyst revision) to the Zacks Consensus Estimate (the average of all analyst forecasts). The percentage difference between these two figures gives the Zacks ESP score. A positive ESP suggests that analysts believe the company will exceed its earnings forecast, while a negative ESP implies the opposite.

When combined with a Zacks Rank of #3 (Hold) or stronger, the ESP has shown promising results. According to a 10-year backtest, stocks with a positive ESP and a Zacks Rank of #3 or better posted a positive earnings surprise 70% of the time. Additionally, these stocks generated an average annual return of approximately 28%.

Understanding the Zacks Rank System

The Zacks Rank is a proprietary ranking system that categorizes stocks based on their expected performance relative to the broader market. Stocks with a Zacks Rank of #3 (Hold) are expected to perform in line with the market. Stocks ranked #2 (Buy) and #1 (Strong Buy) are expected to outperform, with Strong Buy stocks typically showing the highest potential for gains.

This ranking system helps investors make informed decisions by highlighting stocks that are likely to deliver above-average returns. Combining this with a positive Earnings ESP can further enhance the chances of identifying high-performing investments.

Evaluating Okta (OKTA) as a Potential Investment

Okta (OKTA) currently holds a Zacks Rank of #3 (Hold), indicating it is expected to perform in line with the market. With its upcoming earnings release on August 26, 2025, the company’s Most Accurate Estimate stands at $0.86 per share. The Zacks Consensus Estimate is slightly lower at $0.84, resulting in an Earnings ESP of +2.29%. This suggests that analysts believe Okta may exceed its earnings forecast.

Okta is part of a larger group of Computer and Technology stocks with positive Earnings ESPs. Investors looking to capitalize on potential earnings beats should consider using the Zacks Earnings ESP Filter to identify similar opportunities.

Exploring Other Qualifying Stocks

Another stock worth considering is Akamai Technologies (AKAM). It also holds a Zacks Rank of #3 (Hold) and is scheduled to report earnings on November 6, 2025. The company’s Most Accurate Estimate is $1.60 per share, compared to a Zacks Consensus Estimate of $1.53, giving it an Earnings ESP of +4.28%. Like Okta, Akamai is positioned to potentially surprise the market with stronger-than-expected results.

Both Okta and Akamai demonstrate the value of using the Earnings ESP tool to identify stocks with a higher likelihood of beating their earnings forecasts.

Finding Opportunities Before Earnings Reports

Using the Zacks Earnings ESP Filter can help investors uncover stocks with the highest probability of delivering positive or negative surprises. This tool is especially useful during earnings season, as it allows traders to make informed decisions before a company releases its financial results.

By leveraging the Earnings ESP along with the Zacks Rank system, investors can increase their chances of making profitable trades. Whether looking to buy or sell, understanding the potential for earnings surprises is a critical step in developing a successful investment strategy.