Let’s dig into the relative performance of Dynatrace (NYSE:DT) and its peers as we unravel the now-completed Q2 software development earnings season.
As legendary VC investor Marc Andreessen says, "Software is eating the world", and it touches virtually every industry. That drives increasing demand for tools helping software developers do their jobs, whether it be monitoring critical cloud infrastructure, integrating audio and video functionality, or ensuring smooth content streaming.
The 11 software development stocks we track reported a mixed Q2. As a group, revenues beat analysts’ consensus estimates by 1.6% while next quarter’s revenue guidance was in line.
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.
Thankfully, software development stocks have been resilient with share prices up 8% on average since the latest earnings results.
Dynatrace (NYSE:DT)
Founded in Austria in 2005, Dynatrace (NYSE:DT) provides companies with software that allows them to monitor the performance of their full technology stack, from software applications to the infrastructure they run on.Dynatrace reported revenues of $399.2 million, up 19.9% year on year. This print exceeded analysts’ expectations by 1.8%. Despite the top-line beat, it was still a mixed quarter for the company with a decent beat of analysts’ billings estimates but a decline in its gross margin.
"We are pleased with our first quarter performance, which once again exceeded guidance across all our key metrics,” said Rick McConnell, Chief Executive Officer of Dynatrace.
Interestingly, the stock is up 33.9% since reporting and currently trades at $54.20.
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Best Q2: GitLab (NASDAQ:GTLB)
Founded as an open-source project in 2011, GitLab (NASDAQ:GTLB) is a leading software development tools platform.GitLab reported revenues of $182.6 million, up 30.8% year on year, outperforming analysts’ expectations by 3.1%. The business had a strong quarter with an impressive beat of analysts’ billings estimates and a narrow beat of analysts’ ARR (annual recurring revenue) estimates.
GitLab scored the fastest revenue growth and highest full-year guidance raise among its peers. The market seems happy with the results as the stock is up 12.3% since reporting. It currently trades at $50.16.
Weakest Q2: PagerDuty (NYSE:PD)
Started by three former Amazon (NASDAQ:AMZN) engineers, PagerDuty (NYSE:PD) is a software-as-a-service platform that helps companies respond to IT incidents fast and make sure that any downtime is minimized.PagerDuty reported revenues of $115.9 million, up 7.7% year on year, in line with analysts’ expectations. It was a softer quarter as it posted underwhelming revenue guidance for the next quarter and decelerating customer growth.
PagerDuty delivered the weakest full-year guidance update in the group. The company lost 76 customers and ended up with a total of 15,044. The stock is flat since the results and currently trades at $18.10.
Twilio (NYSE:NYSE:TWLO)
Founded in 2008 by Jeff Lawson, a former engineer at Amazon, Twilio (NYSE:TWLO) is a software as a service platform that makes it really easy for software developers to use text messaging, voice calls and other forms of communication in their apps.Twilio reported revenues of $1.08 billion, up 4.3% year on year. This print topped analysts’ expectations by 2.4%. Aside from that, it was a slower quarter as it logged decelerating customer growth and underwhelming revenue guidance for the next quarter.
The company added 3,000 customers to reach a total of 316,000. The stock is up 21.3% since reporting and currently trades at $68.28.
F5 (NASDAQ:FFIV)
Initially started as a hardware appliances company in the late 1990s, F5 (NASDAQ:FFIV) makes software that helps large enterprises ensure their web applications are always available by distributing network traffic and protecting them from cyberattacks.F5 reported revenues of $695.5 million, down 1% year on year. This print topped analysts’ expectations by 1.4%. Zooming out, it was a slower quarter as it recorded a miss of analysts’ billings estimates.
F5 had the slowest revenue growth among its peers. The stock is up 22.8% since reporting and currently trades at $218.28.
This content was originally published on Stock Story
