As the Q3 earnings season comes to a close, it’s time to take stock of this quarter’s best and worst performers in the vertical software industry, including Upstart (NASDAQ: UPST) 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 15 vertical software stocks we track reported a strong Q3. As a group, revenues beat analysts’ consensus estimates by 3.4% while next quarter’s revenue guidance was 0.7% above.
Thankfully, share prices of the companies have been resilient as they are up 7.2% on average since the latest earnings results.
Best Q3: Upstart (NASDAQ: UPST)
Founded by the former head of Google's enterprise business, Upstart (NASDAQ: UPST) is an AI-powered lending platform facilitating loans for banks and consumers.
Upstart reported revenues of $162.1 million, up 20.5% year on year. This print exceeded analysts’ expectations by 7.9%. Overall, it was a stunning quarter for the company with an impressive beat of analysts’ EBITDA estimates and revenue guidance for next quarter exceeding analysts’ expectations.
“With 43% sequential growth in lending volume and a return to positive adjusted EBITDA, we continue to strengthen Upstart’s position as the fintech leader in artificial intelligence,” said Dave Girouard, co-founder and CEO of Upstart.
Interestingly, the stock is up 6.8% since reporting and currently trades at $59.22.
Is now the time to buy Upstart? Access our full analysis of the earnings results here, it’s free.
ANSYS (NASDAQ: ANSS)
Used to help design the Mars Rover, Ansys (NASDAQ: ANSS) offers a software-as-a-service platform that enables simulation for engineering and design.
ANSYS reported revenues of $601.9 million, up 31.2% year on year, outperforming analysts’ expectations by 14.9%. The business had a stunning quarter with an impressive beat of analysts’ EBITDA estimates and a solid beat of analysts’ annual contract value estimates.
ANSYS scored the biggest analyst estimates beat and fastest revenue growth among its peers. The market seems content with the results as the stock is up 2.6% since reporting. It currently trades at $341.86.
Is now the time to buy ANSYS? Access our full analysis of the earnings results here, it’s free.
Weakest Q3: Adobe (NASDAQ: ADBE)
One of the most well-known Silicon Valley software companies around, Adobe (NASDAQ: ADBE) is a leading provider of software as service in the digital design and document management space.
Adobe reported revenues of $5.61 billion, up 11.1% year on year, exceeding analysts’ expectations by 1.2%. Still, it was a slower quarter as it posted revenue guidance for next quarter slightly missing analysts’ expectations and a miss of analysts’ billings estimates.
As expected, the stock is down 23.8% since the results and currently trades at $418.74.
Read our full analysis of Adobe’s results here.
Autodesk (NASDAQ: ADSK)
Founded in 1982 by John Walker and growing into one of the industry's behemoths, Autodesk (NASDAQ: ADSK) makes computer-aided design (CAD) software for engineering, construction, and architecture companies.
Autodesk reported revenues of $1.57 billion, up 11% year on year. This result met analysts’ expectations. Zooming out, it was a satisfactory quarter as it also produced a solid beat of analysts’ EBITDA estimates but annual recurring revenue in line with analysts’ estimates.
Autodesk had the weakest performance against analyst estimates among its peers. The stock is down 7% since reporting and currently trades at $295.51.
Read our full, actionable report on Autodesk here, it’s free.
nCino (NASDAQ: NCNO)
Founded in 2011 in North Carolina, nCino (NASDAQ: NCNO) makes cloud-based operating systems for banks and provides that software-as-a-service.
nCino reported revenues of $138.8 million, up 13.8% year on year. This number beat analysts’ expectations by 1%. Aside from that, it was a mixed quarter as it also recorded an impressive beat of analysts’ EBITDA estimates but a significant miss of analysts’ billings estimates.
The stock is down 21.2% since reporting and currently trades at $33.51.
Read our full, actionable report on nCino here, it’s free.
Market Update
Thanks to the Fed's series of rate hikes in 2022 and 2023, inflation has cooled significantly from its post-pandemic highs, drawing closer to the 2% goal. This disinflation has occurred without severely impacting economic growth, suggesting the success of a soft landing. The stock market has thrived in 2024, spurred by recent rate cuts (0.5% in September and 0.25% each in November and December), and a notable surge followed Donald Trump's presidential election win in November, propelling indices to historic highs. Nonetheless, the outlook for 2025 remains clouded by the pace and magnitude of future rate cuts as well as potential changes in trade policy and corporate taxes once the Trump administration takes over. The path forward is marked by uncertainty.
Want to invest in winners with rock-solid fundamentals? Check out our Strong Momentum Stocks and add them to your watchlist. These companies are poised for growth regardless of the political or macroeconomic climate.
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