The end of the earnings season is always a good time to take a step back and see who shined (and who not so much). Let’s take a look at how software development stocks fared in Q2, starting with JFrog (NASDAQ:FROG).
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 6.3% on average since the latest earnings results.
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 print was in line with analysts’ expectations, but overall, it was a softer quarter for the company with underwhelming revenue guidance for the next quarter and decelerating growth in large customers.
"We are on a mission to revolutionize the software industry with a unified platform that encompasses EveryOps and streamlines the software supply chain flow," said Shlomi Ben Haim, Co-founder and CEO of JFrog.
JFrog Total Revenue
JFrog delivered the weakest performance against analyst estimates of the whole group. The company added 17 enterprise customers paying more than $100,000 annually to reach a total of 928. Unsurprisingly, the stock is down 14.1% since reporting and currently trades at $29.26.
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 Total Revenue
GitLab pulled off 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.
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.
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 result surpassed analysts’ expectations by 1.4%. Taking a step back, it was a softer quarter as it recorded a miss of analysts’ billings estimates.
F5 had the slowest revenue growth among its peers. The stock is up 23.2% since reporting and currently trades at $219.
Founded by two grad students of Harvard Business School, Cloudflare (NYSE:NET) is a software as a service platform that helps improve security, reliability and loading times of internet applications and websites.
Cloudflare reported revenues of $401 million, up 30% year on year. This print topped analysts’ expectations by 1.6%. More broadly, it was a softer quarter as it recorded a miss of analysts’ billings estimates.
The stock is up 9.3% since reporting and currently trades at $81.35.
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