A microservice architecture improves software scalability by breaking applications into smaller, independent services that can be developed, deployed, and scaled individually. This modular approach enables teams to work on different components simultaneously, accelerating development and facilitating continuous integration and deployment. Additionally, microservices can be scaled according to demand, meaning that resources can be allocated more efficiently. This architecture promotes flexibility and resilience, as failure in one service does not impact the entire application, allowing for easier updates and maintenance, ultimately enhancing overall system performance.