The end of an earnings season can be a great time to discover new stocks and assess how companies are handling the current business environment. Let’s take a look at how Toast (NYSE: TOST) and the rest of the vertical software stocks fared in Q3.

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 13 vertical software stocks we track reported a strong Q3. As a group, revenues beat analysts’ consensus estimates by 3.9% while next quarter’s revenue guidance was in line.

While some vertical software stocks have fared somewhat better than others, they have collectively declined. On average, share prices are down 1.6% since the latest earnings results.

Toast (NYSE: TOST)

Born from the frustrations of three friends waiting too long for their restaurant bill, Toast (NYSE: TOST) provides a cloud-based digital technology platform with software, payment processing, and hardware solutions built specifically for restaurants.

Toast reported revenues of $1.63 billion, up 25.1% year on year. This print exceeded analysts’ expectations by 3%. Overall, it was a very strong quarter for the company with a solid beat of analysts’ EBITDA estimates and full-year EBITDA guidance exceeding analysts’ expectations.

The stock is down 2.9% since reporting and currently trades at $34.62.

Is now the time to buy Toast? Access our full analysis of the earnings results here, it’s free for active Edge members.

Best Q3: nCino (NASDAQ: NCNO)

Born from the internal technology needs of a community bank in 2011, nCino (NASDAQ: NCNO) provides cloud-based software that helps financial institutions streamline client onboarding, loan origination, and account opening processes.

nCino reported revenues of $152.2 million, up 9.6% year on year, outperforming analysts’ expectations by 3.3%. The business had an exceptional quarter with an impressive beat of analysts’ billings estimates and EPS guidance for next quarter exceeding analysts’ expectations.

Although it had a fine quarter compared its peers, the market seems unhappy with the results as the stock is down 4.1% since reporting. It currently trades at $24.53.

Is now the time to buy nCino? Access our full analysis of the earnings results here, it’s free for active Edge members.

Weakest Q3: Upstart (NASDAQ: UPST)

Using over 2,500 data variables and trained on nearly 82 million repayment events, Upstart (NASDAQ: UPST) is an AI-powered lending platform that uses machine learning to help banks and credit unions more accurately assess borrower risk for personal loans, auto loans, and home equity lines of credit.

Upstart reported revenues of $277.1 million, up 70.9% year on year, falling short of analysts’ expectations by 1.3%. It was a softer quarter as it posted full-year revenue guidance missing analysts’ expectations significantly and a significant miss of analysts’ transaction volume estimates.

Upstart delivered the fastest revenue growth but had the weakest performance against analyst estimates in the group. As expected, the stock is down 2.3% since the results and currently trades at $45.53.

Read our full analysis of Upstart’s results here.

Adobe (NASDAQ: ADBE)

Originally named after Adobe Creek that ran behind co-founder John Warnock's house, Adobe (NASDAQ: ADBE) develops software products used for digital content creation, document management, and marketing solutions across desktop, mobile, and cloud platforms.

Adobe reported revenues of $6.19 billion, up 10.5% year on year. This number beat analysts’ expectations by 1.4%. Overall, it was a strong quarter as it also put up EPS guidance for next quarter beating analysts’ expectations and a solid beat of analysts’ billings estimates.

The stock is up 1.9% since reporting and currently trades at $349.61.

Read our full, actionable report on Adobe here, it’s free for active Edge members.

Doximity (NYSE: DOCS)

With over 80% of U.S. physicians as members of its digital community, Doximity (NYSE: DOCS) operates a digital platform that enables physicians and other healthcare professionals to collaborate, stay current with medical news, manage their careers, and conduct virtual patient visits.

Doximity reported revenues of $168.5 million, up 23.2% year on year. This result surpassed analysts’ expectations by 7.2%. It was a strong quarter as it also produced a solid beat of analysts’ EBITDA estimates and an impressive beat of analysts’ revenue estimates.

The stock is down 28.9% since reporting and currently trades at $44.51.

Read our full, actionable report on Doximity here, it’s free for active Edge members.

Market Update

The Fed’s interest rate hikes throughout 2022 and 2023 have successfully cooled post-pandemic inflation, bringing it closer to the 2% target. Inflationary pressures have eased without tipping the economy into a recession, suggesting a soft landing. This stability, paired with recent rate cuts (0.5% in September 2024 and 0.25% in November 2024), fueled a strong year for the stock market in 2024. The markets surged further after Donald Trump’s presidential victory in November, with major indices reaching record highs in the days following the election. Still, questions remain about the direction of economic policy, as potential tariffs and corporate tax changes add uncertainty for 2025.

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