As the Q2 earnings season comes to a close, it’s time to take stock of this quarter’s best and worst performers in the vertical software industry, including Veeva Systems (NYSE:VEEV) 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 15 vertical software stocks we track reported a mixed Q2. As a group, revenues beat analysts’ consensus estimates by 1.9% while next quarter’s revenue guidance was 1.1% 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 20.5% on average since the latest earnings results.
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 $676.2 million, up 14.6% year on year. This print exceeded analysts’ expectations by 1.2%. Overall, it was a strong quarter for the company with full-year revenue guidance exceeding analysts’ expectations and a meaningful improvement in its gross margin.
"It was another quarter of great execution, with major product advances in clinical and CRM that position us well for the industry cloud opportunity we see ahead," said CEO Peter Gassner.
Interestingly, the stock is up 9% since reporting and currently trades at $217.33.
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Best Q2: Olo (NYSE:OLO)
Founded by Noah Glass, who wanted to get a cup of coffee faster on his way to work, Olo (NYSE:OLO) provides restaurants and food retailers with software to manage food orders and delivery.Olo reported revenues of $70.5 million, up 27.6% year on year, outperforming analysts’ expectations by 4.1%. The business had a very strong quarter with full-year revenue guidance exceeding analysts’ expectations and an impressive beat of analysts’ GMV (gross merchandise value) estimates.
Olo scored the fastest revenue growth among its peers. The market seems content with the results as the stock is up 4% since reporting. It currently trades at $4.98.
Slowest Q2: Unity (NYSE: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 $449.3 million, down 15.8% year on year, exceeding analysts’ expectations by 1.7%. Still, it was a slower quarter as it posted a miss of analysts’ billings estimates.
Unity delivered the slowest revenue growth in the group. Interestingly, the stock is up 52.4% since the results and currently trades at $21.88.
Doximity (NYSE:NYSE:DOCS)
Founded in 2010 and named for a combination of “docs” and “proximity”, Doximity (NYSE: DOCS) is the leading social network for U.S. medical professionals.Doximity reported revenues of $126.7 million, up 16.8% year on year. This print beat analysts’ expectations by 5.7%. Overall, it was a strong quarter as it also produced full-year revenue guidance exceeding analysts’ expectations.
The stock is up 73% since reporting and currently trades at $44.41.
Q2 Holdings (NYSE:QTWO)
Founded in 2004 by Hank Seale, Q2 (NYSE:QTWO) offers software-as-a-service that enables small banks to provide online banking and consumer lending services to their clients.Q2 Holdings reported revenues of $172.9 million, up 11.8% year on year. This print beat analysts’ expectations by 1.1%. It was a very strong quarter as it also produced an impressive beat of analysts’ billings estimates and full-year revenue guidance exceeding analysts’ expectations.
The stock is up 19.1% since reporting and currently trades at $80.42.
This content was originally published on Stock Story
