Q2 Earnings Outperformers: F5 (NASDAQ:FFIV) And The Rest Of The Software Development Stocks

FFIV Cover Image — Q2 Earnings Outperformers: F5 (NASDAQ:FFIV) And The Rest Of The Software Development Stocks

Adam Hejl

Tue, Oct 1, 2024, 2:56 AM 5 min read

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.

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.

Thankfully, software development stocks have been resilient with share prices up 6.2% on average since the latest earnings results.

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 exceeded analysts’ expectations by 1.4%. Despite the top-line beat, it was still a slower quarter for the company with a miss of analysts’ billings estimates.

“We delivered third quarter revenue at the top end of our guidance range fueled by software growth and continued growth of our global services offerings,” said Fran?ois Locoh-Donou, F5’s President and CEO.

F5 delivered the slowest revenue growth of the whole group. Interestingly, the stock is up 23.2% since reporting and currently trades at $219.

Read our full report on F5 here, it’s free.

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 15.8% since reporting. It currently trades at $51.76.

Is now the time to buy GitLab? Access our full analysis of the earnings results here, it’s free.

Weakest Q2: PagerDuty (NYSE:PD)

Started by three former Amazon 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 $18.25.

Read our full analysis of PagerDuty’s results here.

JFrog (NASDAQ:FROG)

Named after the founders' affinity for frogs, JFrog (NASDAQ:FROG) provides a software-as-a-service platform that makes developing and releasing software easier and faster, especially for large teams.

JFrog reported revenues of $103 million, up 22.4% year on year. This number met analysts’ expectations. Taking a step back, it was a slower quarter as it logged underwhelming revenue guidance for the next quarter and decelerating growth in large customers.

JFrog had the weakest performance against analyst estimates among its peers. The company added 17 enterprise customers paying more than $100,000 annually to reach a total of 928. The stock is down 14.1% since reporting and currently trades at $29.26.

Read our full, actionable report on JFrog here, it’s free.

Datadog (NASDAQ:DDOG)

Named after a database the founders had to painstakingly look after at their previous company, Datadog (NASDAQ:DDOG) is a software-as-a-service platform that makes it easier to monitor cloud infrastructure and applications.

Datadog reported revenues of $645.3 million, up 26.7% year on year. This result topped analysts’ expectations by 3.2%. More broadly, it was a slower quarter as it also logged an impressive beat of analysts’ billings estimates but decelerating growth in large customers.

The company added 50 enterprise customers paying more than $100,000 annually to reach a total of 3,390. The stock is up 6% since reporting and currently trades at $114.66.

Read our full, actionable report on Datadog here, it’s free.

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