Let’s dig into the relative performance of Upstart (NASDAQ: UPST) and its peers as we unravel the now-completed Q2 vertical software earnings season.
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 14 vertical software stocks we track reported a very strong Q2. As a group, revenues beat analysts’ consensus estimates by 4.1% while next quarter’s revenue guidance was in line.
Amidst this news, share prices of the companies have had a rough stretch. On average, they are down 8.4% since the latest earnings results.
Best Q2: 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 $257.3 million, up 102% year on year. This print exceeded analysts’ expectations by 13.6%. Overall, it was a stunning quarter for the company with EBITDA guidance for next quarter exceeding analysts’ expectations.
“A year ago, you saw the first signs that Upstart was returning to growth mode - and today you can see it in full bloom,” said Dave Girouard, Co-founder and CEO of Upstart.
Upstart achieved the biggest analyst estimates beat and fastest revenue growth of the whole group. Investor expectations, however, were likely higher than Wall Street’s published projections, leaving some wishing for even better results (analysts’ consensus estimates are those published by big banks and advisory firms, not the investors who make buy and sell decisions). The stock is down 42.5% since reporting and currently trades at $47.50.
PTC (NASDAQ: PTC)
Originally known as Parametric Technology Corporation until its 2013 rebranding, PTC (NASDAQ: PTC) provides software that helps manufacturers design, develop, and service physical products through digital solutions for CAD, PLM, ALM, and SLM.
PTC reported revenues of $643.9 million, up 24.2% year on year, outperforming analysts’ expectations by 10.4%. The business had an exceptional quarter with EPS guidance for next quarter exceeding analysts’ expectations and an impressive beat of analysts’ EBITDA estimates.
PTC scored the highest full-year guidance raise among its peers. Although it had a fine quarter compared its peers, the market seems unhappy with the results as the stock is down 2.2% since reporting. It currently trades at $198.81.
Is now the time to buy PTC? Access our full analysis of the earnings results here, it’s free for active Edge members.
Weakest Q2: Agilysys (NASDAQ: AGYS)
With a tech stack that powers everything from check-in to checkout at some of the world's top hospitality venues, Agilysys (NASDAQ: AGYS) develops and provides cloud-based and on-premise software solutions for hotels, resorts, casinos, and restaurants to manage operations and enhance guest experiences.
Agilysys reported revenues of $76.68 million, up 20.7% year on year, exceeding analysts’ expectations by 3.1%. Still, it was a slower quarter as it posted a significant miss of analysts’ EBITDA estimates.
Agilysys delivered the weakest full-year guidance update in the group. As expected, the stock is down 9.5% since the results and currently trades at $106.
Read our full analysis of Agilysys’s results here.
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 $145.9 million, up 15.2% year on year. This print surpassed analysts’ expectations by 4.5%. Overall, it was an exceptional quarter as it also logged an impressive beat of analysts’ billings estimates and EBITDA guidance for next quarter exceeding analysts’ expectations.
The stock is up 10.7% since reporting and currently trades at $64.99.
Read our full, actionable report on Doximity here, it’s free for active Edge members.
Q2 Holdings (NYSE: QTWO)
With a platform powering digital services for approximately 25 million account holders across America, Q2 Holdings (NYSE: QTWO) provides cloud-based digital solutions that help financial institutions, fintechs, and alternative finance companies deliver modern banking experiences to their customers.
Q2 Holdings reported revenues of $195.1 million, up 12.9% year on year. This number beat analysts’ expectations by 0.8%. It was an exceptional quarter as it also recorded an impressive beat of analysts’ annual recurring revenue estimates and a solid beat of analysts’ billings estimates.
Q2 Holdings had the weakest performance against analyst estimates among its peers. The stock is down 31.3% since reporting and currently trades at $61.94.
Read our full, actionable report on Q2 Holdings here, it’s free for active Edge members.
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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