The end of the earnings season is always a good time to take a step back and see who shined (and who not so much). Let’s take a look at how vertical software stocks fared in Q2, starting with Alarm.com (NASDAQ:ALRM).
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 strong Q2. As a group, revenues beat analysts’ consensus estimates by 2.7% while next quarter’s revenue guidance was 7.5% above.
Inflation progressed towards the Fed's 2% goal recently, leading the Fed to reduce its policy rate by 50bps (half a percent or 0.5%) in September 2024. This is the first cut in four years. While CPI (inflation) readings have been supportive lately, employment measures have bordered on worrisome. The markets will be debating whether this rate cut's timing (and more potential ones in 2024 and 2025) is ideal for supporting the economy or a bit too late for a macro that has already cooled too much.
Luckily, vertical software stocks have performed well with share prices up 11.3% on average since the latest earnings results.
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 $233.8 million, up 4.4% year on year. This print exceeded analysts’ expectations by 2.9%. Overall, it was a strong quarter for the company with a solid beat of analysts’ billings estimates and full-year revenue guidance topping analysts’ expectations.
“We’re pleased to report solid results for the second quarter,” said Steve Trundle, CEO of Alarm.com.
Alarm.com delivered the slowest revenue growth and weakest full-year guidance update of the whole group. Unsurprisingly, the stock is down 16.2% since reporting and currently trades at $55.
Is now the time to buy Alarm.com? Access our full analysis of the earnings results here, it’s free.
Best Q2: 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 $291.5 million, up 8% year on year, outperforming analysts’ expectations by 2.7%. The business had an exceptional quarter with an impressive beat of analysts’ billings estimates and a significant improvement in its gross margin.
Guidewire scored the highest full-year guidance raise among its peers. The market seems happy with the results as the stock is up 23.7% since reporting. It currently trades at $177.95.
Is now the time to buy Guidewire? Access our full analysis of the earnings results here, it’s free.
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 $330.3 million, up 11.3% year on year, exceeding analysts’ expectations by 1.6%. Still, it was a mixed quarter as it posted a miss of analysts’ ARR (annual recurring revenue) estimates.
Bentley delivered the weakest performance against analyst estimates in the group. Interestingly, the stock is up 13.5% since the results and currently trades at $50.84.
Read our full analysis of Bentley’s results here.
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 $265.3 million, up 14.8% year on year. This number beat analysts’ expectations by 3.5%. Overall, it was a strong quarter as it also produced a significant improvement in its gross margin and full-year revenue guidance topping analysts’ expectations.
Manhattan Associates pulled off the biggest analyst estimates beat and fastest revenue growth among its peers. The stock is up 24% since reporting and currently trades at $280.25.
Read our full, actionable report on Manhattan Associates here, it’s free.
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