Earnings results often give us a good indication of what direction the company take in the months ahead. With Q3 now behind us, let’s have a look at 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, there are industries that have very specific needs. Whether it is life-sciences, education or banking, the demand for so called vertical software, addressing industry specific workflows, is growing, fueled by the pressures on improving productivity and quality of offerings.
The 11 vertical software stocks we track reported a weaker Q3; on average, revenues were in line with analyst consensus estimates, while on average next quarter revenue guidance was 2.32% under consensus. There has been a stampede out of high valuation technology stocks as raising interest rates encourage investors to value profits over growth again, but vertical software stocks held their ground better than others, with the share prices up 0.85% since the previous earnings results, on average.
Weakest Q3: Upstart (NASDAQ:UPST)
Founded by the former head of Google's enterprise business Dave Girouard, Upstart (NASDAQ:UPST) is an AI-powered lending platform that helps banks better evaluate the risk of lending money to a person and provide loans to more customers.
Upstart reported revenues of $157.2 million, down 31.2% year on year, missing analyst expectations by 7.2%. It was a weak quarter for the company, with declining revenue and underwhelming topline guidance for the next quarter.
“We’re eyes wide open to the challenges of the current macroeconomy, and determined to make the decisions that will optimize for the long-term success of Upstart,” said Dave Girouard, co-founder and CEO of Upstart.
Upstart delivered the weakest performance against analyst estimates of the whole group. The stock is down 27.3% since the results and currently trades at $13.85.
Best Q3: Toast (NYSE:TOST)
Founded by three MIT engineers at a local Cambridge bar, Toast (NYSE:TOST) provides integrated point of sale (POS) hardware, software, and payments solutions for restaurants.
Toast reported revenues of $752 million, up 54.6% year on year, beating analyst expectations by 4.31%. It was a very strong quarter for the company, with a significant improvement in gross margin and exceptional revenue growth.
Toast achieved the fastest revenue growth among its peers. The stock is down 7% since the results and currently trades at $18.6.
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Q2 Holdings (NYSE:QTWO)
Founded in 2004 by Hank Seale, Q2 (NYSE:QTWO) offers software as a service that enables small banks provide online banking and consumer lending services to their clients.
Q2 Holdings reported revenues of $144.7 million, up 14.2% year on year, missing analyst expectations by 1.37%. It was a weak quarter for the company, with revenue guidance for the next quarter missing analysts' expectations.
Q2 Holdings had the weakest full year guidance update in the group. The stock is up 8.26% since the results and currently trades at $28.56.
Veeva Systems (NYSE:VEEV)
Built on top of Salesforce as one of the first vertical-focused cloud platforms, Veeva (NYSE:VEEV) provides data and customer relationship management (CRM) software for organizations in the life sciences industry.
Veeva Systems reported revenues of $552.3 million, up 16% year on year, beating analyst expectations by 1.15%. It was a mixed quarter for the company, with a beat of topline estimates but revenue guidance for the next quarter missing analysts' expectations.
The stock is down 13.1% since the results and currently trades at $166.40.
Originally named 2tor after the founder's dog Tor, 2U (NASDAQ:TWOU) provides software for universities and colleges to deliver online degree programs and courses.
2U reported revenues of $232.2 million, down 0.05% year on year, in line with analyst expectations. It was a weak quarter for the company, with flat revenue growth and declining gross margin.
The stock is up 0.78% since the results and currently trades at $6.43.
The author has no position in any of the stocks mentioned