Looking back on vertical software stocks’ Q1 earnings, we examine this quarter’s best and worst performers, including Alarm.com (NASDAQ: ALRM) and its peers.
Software is eating the world, and while a large number of solutions such as project management or video conferencing software can be useful to a wide array of industries, some have very specific needs. As a result, vertical software, which addresses industry-specific workflows, is growing and fueled by the pressures to improve productivity, whether it be for a life sciences, education, or banking company.
The 4 vertical software stocks we track reported a very strong Q1. As a group, revenues beat analysts’ consensus estimates by 2% while next quarter’s revenue guidance was in line.
Luckily, vertical software stocks have performed well with share prices up 14.5% on average since the latest earnings results.
Weakest Q1: Alarm.com (NASDAQ: ALRM)
Founded in 2000 as a business unit within MicroStrategy, Alarm.com (NASDAQ: ALRM) is a software-as-a-service platform that enables users to control their security systems and smart home appliances from a single app.
Alarm.com reported revenues of $238.8 million, up 7% year on year. This print exceeded analysts’ expectations by 1.9%. Overall, it was a strong quarter for the company with a solid beat of analysts’ EBITDA estimates and an impressive beat of analysts’ billings estimates.
Alarm.com delivered the weakest full-year guidance update of the whole group. The market was likely pricing in the results, and the stock is flat since reporting. It currently trades at $55.51.
Is now the time to buy Alarm.com? Access our full analysis of the earnings results here, it’s free.
Best Q1: Manhattan Associates (NASDAQ: MANH)
Boasting major consumer staples and pharmaceutical companies as clients, Manhattan Associates (NASDAQ: MANH) offers a software-as-service platform that helps customers manage their supply chains.
Manhattan Associates reported revenues of $262.8 million, up 3.2% year on year, outperforming analysts’ expectations by 2.3%. The business had a very strong quarter with an impressive beat of analysts’ EBITDA estimates and full-year EPS guidance beating analysts’ expectations.
The market seems happy with the results as the stock is up 24.8% since reporting. It currently trades at $202.48.
Is now the time to buy Manhattan Associates? Access our full analysis of the earnings results here, it’s free.
Guidewire (NYSE: GWRE)
Founded by two individuals involved in the development of leading procurement software Ariba, Guidewire (NYSE: GWRE) offers insurance companies a software-as-a-service platform to help sell their products and manage their workflows.
Guidewire reported revenues of $293.5 million, up 22% year on year, exceeding analysts’ expectations by 2.4%. It may have had the worst quarter among its peers, but its results were still good as it also locked in a solid beat of analysts’ billings estimates and an impressive beat of analysts’ EBITDA estimates.
Interestingly, the stock is up 1.3% since the results and currently trades at $221.15.
Read our full analysis of Guidewire’s results here.
Bentley (NASDAQ: BSY)
Founded by brothers Keith and Barry Bentley, Bentley Systems (NASDAQ: BSY) offers a software-as-a-service platform that addresses the lifecycle of infrastructure projects such as road networks, tunnel systems, and wastewater facilities.
Bentley reported revenues of $370.5 million, up 9.7% year on year. This print topped analysts’ expectations by 1.4%. Overall, it was a very strong quarter as it also put up a solid beat of analysts’ EBITDA estimates and an impressive beat of analysts’ billings estimates.
Bentley had the weakest performance against analyst estimates among its peers. The stock is up 31.4% since reporting and currently trades at $57.48.
Read our full, actionable report on Bentley here, it’s free.
Market Update
As a result of the Fed’s rate hikes in 2022 and 2023, inflation has come down from frothy levels post-pandemic. The general rise in the price of goods and services is trending towards the Fed’s 2% goal as of late, which is good news. The higher rates that fought inflation also didn't slow economic activity enough to catalyze a recession. So far, soft landing. This, combined with recent rate cuts (half a percent in September 2024 and a quarter percent in November 2024) have led to strong stock market performance in 2024. The icing on the cake for 2024 returns was Donald Trump’s victory in the U.S. Presidential Election in early November, sending major indices to all-time highs in the week following the election. Still, debates around the health of the economy and the impact of potential tariffs and corporate tax cuts remain, leaving much uncertainty around 2025.
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