Q2 Vertical Software Stocks in Review: Upstart (NASDAQ:UPST) vs. Rivals

As we look back at the second quarter earnings numbers of vertical software stocks, we look at the quarter’s best and worst performers, including Upstart (NASDAQ:UPST) and peers.

Software is taking over the world, and while many solutions such as project management or video conferencing software can be useful for a wide range of industries, some have very specific needs. As a result, vertical software, which focuses on industry-specific workflows, is growing and is fueled by the pressure to improve productivity, whether it’s a life sciences, education, or banking company.

The 15 vertical software stocks we track reported a mixed second quarter. As a group, revenues topped analysts’ consensus estimates by 1.9%, while next-quarter revenue forecasts were 1.1% higher.

Inflation has recently moved toward the Fed’s 2% target, prompting the Fed to cut its policy rate by 50 bps (half a percent or 0.5%) in September 2024. This is the first cut in four years. While CPI (inflation) numbers have been supportive of late, employment measures have bordered on worrisome. Markets will debate whether the timing of this rate cut (and more potential cuts in 2024 and 2025) is ideal to support the economy or a bit too late for a macro that has already cooled too much.

Fortunately, vertical software stocks have performed well, with share prices up an average of 12.6% since the last earnings report.

Upstart (NASDAQ:UPST)

Upstart (NASDAQ:UPST), founded by Dave Girouard, former head of Google’s enterprise division, is an AI-powered lending platform that helps banks better assess the risks of lending money to an individual and lend to more customers.

Upstart reported revenue of $127.6 million, down 6% year-over-year. The print topped analysts’ expectations by 2.5%. Despite the top-line beat, it was still a mixed quarter for the company, with optimistic revenue guidance for the next quarter but a decline in gross margin.

“The guidance we published today demonstrates that we are on track to resume our role as a fintech company known for high growth and healthy margins,” said Dave Girouard, CEO of Upstart.

Interestingly, the stock is up 57.6% since the report and is currently trading at $37.60.

Is now the time to buy Upstart? Check out our full earnings analysis here, it’s free.

Best Second Quarter: Olo (NYSE:OLO)

Olo (NYSE:OLO) was founded by Noah Glass, who wanted to get a cup of coffee faster on his way to work. Olo provides restaurants and grocery retailers with software to manage grocery orders and delivery.

Olo reported revenue of $70.5 million, up 27.6% year over year, beating analyst expectations by 4.1%. The company had a very strong quarter, impressively beating analysts’ gross merchandise value (GMV) estimates and solidly beating analysts’ billings estimates.

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Olo achieved the fastest revenue growth and highest full-year guidance increase among its peers. The market seems pleased with the results, as the stock is up 5.4% since the report. It is currently trading at $5.05.

Is now the time to buy Olo? Check out our full profit analysis here, it’s free.

Weakest Q2: PTC (NASDAQ:PTC)

PTC’s (NASDAQ:PTC) software-as-service platform is used in the design of the Airbus A380 and Boeing 787 Dreamliner commercial aircraft, helping engineers and designers create and test products before production.

PTC reported revenue of $518.6 million, down 4.4% year over year, 2.8% below analysts’ expectations. It was a softer quarter, as it reported a miss on analysts’ billings estimates and a decline in gross margin.

PTC delivered the weakest performance against analyst estimates and the weakest full-year forecast update of the group. The stock has been flat since the results, currently trading at $177.78.

Read our full analysis of PTC’s results here.

Unity (NYSE:U)

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. It was founded by three friends in an apartment in Copenhagen.

Unity reported revenue of $449.3 million, down 15.8% year over year. This result beat analysts’ expectations by 1.7%. Other than that, it was a mixed quarter with a miss on analysts’ billings estimates.

Unity had the slowest revenue growth among its peers. The stock is up 60.2% since the report and currently trades at $23.

Read our full hands-on report on Unity here. It’s free.

Cadence (NASDAQ:CDNS)

The name Cadence Design Systems (NASDAQ:CDNS) reflects the idea of ​​a repeating pattern or rhythm in electronic design and provides a software-as-a-service platform for semiconductor engineering and design.

Cadence reported revenue of $1.06 billion, up 8.6% year-over-year. This result beat analysts’ expectations by 1.7%. Other than that, it was a mixed quarter, as it also recorded a solid beating of analysts’ billings estimates, but a decline in gross margin.

The stock has fallen 5.7% since the report, currently trading at $270.90.

Read our full, actionable report on Cadence here. It’s free.

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