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Q1 Earnings Outperformers: Upstart (NASDAQ:UPST) And The Rest Of The Vertical Software Stocks


Jabin Bastian /
2022/06/27 4:30 am EDT
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Wrapping up Q1 earnings, we look at the numbers and key takeaways for the vertical software stocks, 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, 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 mixed Q1; on average, revenues beat analyst consensus estimates by 2.53%, while on average next quarter revenue guidance was 2.08% under consensus. Tech stocks have been under pressure since the end of last year, but vertical software stocks held their ground better than others, with the share price up 3.75% since earnings, on average.

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 $310.1 million, up 153% year on year, beating analyst expectations by 3.33%. Despite the solid top-line growth, it was a weak quarter for the company, with revenue guidance for both the next quarter and the full year below analysts' estimates.

“Upstart just delivered our seventh consecutive profitable quarter and our fourth straight quarter with triple-digit year-on-year revenue growth,” said Dave Girouard co-founder and CEO of Upstart.

Upstart Total Revenue

Upstart pulled off the fastest revenue growth but had the weakest full year guidance update of the whole group. The stock is down 45.9% since the results and currently trades at $41.68.

Is now the time to buy Upstart? Access our full analysis of the earnings results here, it's free.

Best Q1: 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 $535 million, up 52% year on year, beating analyst expectations by 9.07%. It was an incredible quarter for the company, with a significant improvement in gross margin and a very optimistic guidance for the next quarter.

Toast Total Revenue

Toast achieved the strongest analyst estimates beat and highest full year guidance raise among its peers. The stock is up 7.64% since the results and currently trades at $15.35.

Is now the time to buy Toast? Access our full analysis of the earnings results here, it's free.

Weakest Q1: Unity (NYSE:U)

Started as a game studio by three friends in a Copenhagen apartment, Unity (NYSE:U) is a software as a service platform that makes it easier to develop and monetize new games and other visual digital experiences.

Unity reported revenues of $320.1 million, up 36.3% year on year, missing analyst expectations by 0.31%. It was a weak quarter for the company, with revenue guidance for both the next quarter and the full year below analysts' estimates.

Unity had the weakest performance against analyst estimates in the group. The company added 31 enterprise customers paying more than $100,000 annually to a total of 1,083. The stock is down 0.83% since the results and currently trades at $47.68.

Read our full analysis of Unity's results here.

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 $134 million, up 15% year on year, beating analyst expectations by 1.21%. It was a mixed quarter for the company, with a narrow beat of top-line revenue estimates, but guidance for the next quarter below analysts' expectations.

The stock is down 21.4% since the results and currently trades at $41.65.

Read our full, actionable report on Q2 Holdings here, it's free.

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 $1.17 billion, up 18.2% year on year, beating analyst expectations by 2.06%. It was a mixed quarter for the company, with a decent beat of analyst estimates but a full-year guidance missing analysts' expectations.

The stock is up 2.09% since the results and currently trades at $195.65.

Read our full, actionable report on Autodesk here, it's free.

The author has no position in any of the stocks mentioned