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 automation software industry, including Microsoft (NASDAQ:MSFT) and its peers.
The whole purpose of software is to automate tasks to increase productivity. Today, innovative new software techniques, often involving AI and machine learning, are finally allowing automation that has graduated from simple one- or two-step workflows to more complex processes integral to enterprises. The result is surging demand for modern automation software.
The 6 automation software stocks we track reported a strong Q2. As a group, revenues beat analysts’ consensus estimates by 2.8% while next quarter’s revenue guidance was in line.
After much suspense, the Federal Reserve cut its policy rate by 50bps (half a percent) in September 2024. This marks the central bank’s first easing of monetary policy since 2020 and the end of its most pointed inflation-busting campaign since the 1980s. Inflation had begun to run hot in 2021 post-COVID due to a confluence of factors such as supply chain disruptions, labor shortages, and stimulus spending. While CPI (inflation) readings have been supportive lately, employment measures have prompted some concern. Going forward, the markets will debate whether this rate cut (and more potential ones in 2024 and 2025) is perfect timing to support the economy or a bit too late for a macro that has already cooled too much.
Thankfully, automation software stocks have been resilient with share prices up 6.3% on average since the latest earnings results.
Microsoft (NASDAQ:MSFT)
Short for microcomputer software, Microsoft (NASDAQ:MSFT) is the largest software vendor in the world with its Windows operating system, Office suite, and cloud computing services.
Microsoft reported revenues of $64.73 billion, up 15.2% year on year. This print was in line with analysts’ expectations, and overall, it was a satisfactory quarter for the company with revenue meeting analysts’ estimates. Moving down the P&L, operating and EPS beat slightly.
Microsoft Total Revenue
Microsoft delivered the weakest performance against analyst estimates of the whole group. The market was likely pricing in the results, and the stock is flat since reporting. It currently trades at $419.20.
Founded by Alan Trefler in 1983, Pegasystems (NASDAQ:PEGA) offers a software-as-a-service platform to automate and optimize workflows in customer service and engagement.
Pegasystems reported revenues of $351.2 million, up 17.7% year on year, outperforming analysts’ expectations by 8.1%. The business had an exceptional quarter with a solid beat of analysts’ billings estimates and an improvement in its gross margin.
Pegasystems Total Revenue
Pegasystems delivered the biggest analyst estimates beat among its peers. The market seems happy with the results as the stock is up 21% since reporting. It currently trades at $73.99.
Founded by Matt Calkins and his three friends out of an apartment in Northern Virginia, Appian (NASDAQ:APPN) sells a software platform that lets its users build applications without using much code, allowing them to create new software more quickly.
Appian reported revenues of $146.5 million, up 14.7% year on year, exceeding analysts’ expectations by 2.5%. Still, it was a slower quarter as it posted a miss of analysts’ billings estimates and a decline in its gross margin.
Appian delivered the weakest full-year guidance update in the group. As expected, the stock is down 13.8% since the results and currently trades at $31.88.
Started in 2005 in Romania as a tech outsourcing company, UiPath (NYSE:PATH) makes software that helps companies automate repetitive computer tasks.
UiPath reported revenues of $316.3 million, up 10.1% year on year. This print topped analysts’ expectations by 4.1%. It was a very strong quarter as it also put up an impressive beat of analysts’ billings estimates and full-year revenue guidance exceeding analysts’ expectations.
UiPath pulled off the highest full-year guidance raise but had the slowest revenue growth among its peers. The stock is flat since reporting and currently trades at $12.71.
Founded by Fred Luddy, who wrote the code for the company's initial prototype on a flight from San Francisco to London, ServiceNow (NYSE:NOW) offers a software-as-a-service platform that helps companies become more efficient by allowing them to automate workflows across IT, HR, and customer service.
ServiceNow reported revenues of $2.63 billion, up 22.2% year on year. This result was in line with analysts’ expectations. It was a strong quarter as it also logged accelerating growth in large customers and a solid beat of analysts’ billings estimates.
ServiceNow achieved the fastest revenue growth among its peers. The company added 55 enterprise customers paying more than $1m annually to reach a total of 1,988. The stock is up 29.1% since reporting and currently trades at $944.63.
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