The end of an earnings season can be a great time to assess how companies are handling the current business environment and discover new stocks. Let’s have a look at how Unity (NYSE:U) and the rest of the vertical software stocks fared in Q1.
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. The whole tech sector has been facing a sell-off since late last year, but vertical software stocks held their ground better than others, with the share price up 0.94% since earnings, on average.
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 delivered record quarterly revenue in the first quarter of 2022, the highest in the company’s history, up 36% compared with the first quarter of 2021, with Create over-performing at 65% year-on-year growth, offset by slower growth in Operate,” said John Riccitiello, President and Chief Executive Officer, Unity.
Unity delivered the weakest performance against analyst estimates of the whole group. The company added 31 enterprise customers paying more than $100,000 annually to a total of 1,083. The stock is down 6.92% since the results and currently trades at $44.74.
Is now the time to buy Unity? 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 achieved the strongest analyst estimates beat and highest full year guidance raise among its peers. The stock is up 7.22% since the results and currently trades at $15.29.
Is now the time to buy Toast? Access our full analysis of the earnings results here, it's free.
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 achieved the fastest revenue growth but had the weakest full year guidance update in the group. The stock is down 49.1% since the results and currently trades at $39.23.
One of the most well-known Silicon Valley software companies around, Adobe (NASDAQ:ADBE) is a leading provider of software as service in the digital design and document management space.
Adobe reported revenues of $4.38 billion, up 14.3% year on year, in line with analyst expectations. It was a weak quarter for the company, with revenue guidance for both the next quarter and the full year below analysts' estimates.
The stock is up 4.84% since the results and currently trades at $383.60.
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 22.6% since the results and currently trades at $41.03.
The author has no position in any of the stocks mentioned