Wrapping up Q2 earnings, we look at the numbers and key takeaways for the vertical software stocks, including Guidewire (NYSE:GWRE) 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, 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 very strong Q2. As a group, revenues beat analysts’ consensus estimates by 2.7% while next quarter’s revenue guidance was 7.5% above.
The Fed cut its policy rate by 50bps (half a percent) in September 2024, the first in roughly four years. This marks the end of its most pointed inflation-busting campaign since the 1980s. While CPI (inflation) readings have been supportive lately, employment measures have bordered on worrisome. The markets will be assessing 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 14.5% on average since the latest earnings results.
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. This print exceeded analysts’ expectations by 2.7%. Overall, it was an exceptional quarter for the company with an impressive beat of analysts’ billings estimates and a significant improvement in its gross margin.
“We finished the year with record fourth quarter sales activity and fully ramped ARR growth of 19%,” said Mike Rosenbaum, chief executive officer, Guidewire.
Guidewire pulled off the highest full-year guidance raise of the whole group. Unsurprisingly, the stock is up 30.8% since reporting and currently trades at $188.19.
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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, outperforming analysts’ expectations by 3.5%. The business had an exceptional quarter with full-year revenue guidance exceeding analysts’ expectations and a significant improvement in its gross margin.
Manhattan Associates delivered the biggest analyst estimates beat and fastest revenue growth among its peers. The market seems happy with the results as the stock is up 33.4% since reporting. It currently trades at $301.40.
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 11.6% since the results and currently trades at $49.99.
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 number surpassed analysts’ expectations by 2.9%. It was an exceptional quarter as it also logged full-year revenue guidance exceeding analysts’ expectations and a solid beat of analysts’ billings estimates.
Alarm.com had the slowest revenue growth among its peers. The stock is down 17.6% since reporting and currently trades at $54.03.
This content was originally published on Stock Story
