The end of an earnings season can be a good time to discover new stocks and assess how companies are coping with the current business environment. Let’s take a look at how F5 (NASDAQ:FFIV) and the rest of the software development stocks fared in the second quarter.
As legendary venture capital investor Marc Andreessen says, “Software is eating the world,” and it’s affecting virtually every industry. That’s driving increasing demand for tools that help software developers do their work, whether it’s monitoring critical cloud infrastructure, integrating audio and video functionality, or ensuring smooth content streaming.
The eleven software development stocks we track reported a mixed second quarter. As a group, revenues exceeded analyst consensus expectations by 1.6%, while revenue expectations for the next quarter were in line.
Inflation has recently risen toward the Fed’s 2% target, prompting the Fed to cut its policy rate by 50 basis points (half a percent or 0.5%) in September 2024. This is the first reduction in four years. While the CPI (inflation) numbers have been supportive lately, the employment measures have turned out to be almost worrisome. Markets will debate whether the timing of this rate cut (and more potential ones in 2024 and 2025) is ideal to support the economy, or whether it is a bit too late for a macro that has already cooled too much.
Fortunately, software development stocks have been resilient, with share prices up an average of 6.2% since the last earnings results.
F5 (NASDAQ:FFIV)
F5 (NASDAQ:FFIV) initially started as a hardware equipment company in the late 1990s, making software that helps large enterprises ensure their web applications are always available by distributing network traffic and protecting them from cyberattacks.
F5 reported revenue of $695.5 million, down 1% year over year. This print exceeded analyst expectations by 1.4%. Despite the revenue increase, it was still a slower quarter for the company, missing analyst expectations.
“We delivered third quarter revenue at the high end of our expectations, fueled by software growth and continued growth in our global services offering,” said François Locoh-Donou, president and CEO of F5.
F5 delivered the slowest sales growth of the entire group. Interestingly, the stock is up 23.2% since reporting and is currently trading at $219.
Read our full report on F5 here, it’s free.
Best Second Quarter: GitLab (NASDAQ:GTLB)
Founded as an open source project in 2011, GitLab (NASDAQ:GTLB) is a leading platform for software development tools.
GitLab reported revenue of $182.6 million, up 30.8% year over year, and beat analyst expectations by 3.1%. The company had a strong quarter with an impressive gain in analyst expectations and a narrow gain in ARR (annual recurring revenue) estimates.
GitLab scored the fastest revenue growth and highest full-year forecast lift among its peers. The market seems pleased with the results, as the stock is up 15.8% since reporting. It is currently trading at $51.76.
Is Now the Time to Buy GitLab? See our full analysis of earnings results here. It’s free.
Weakest second quarter: PagerDuty (NYSE:PD)
Founded by three former Amazon engineers, PagerDuty (NYSE:PD) is a software-as-a-service platform that helps companies quickly respond to IT incidents and ensure any downtime is minimized.
PagerDuty reported revenue of $115.9 million, up 7.7% year over year, in line with analyst expectations. It was a weaker quarter as revenue expectations for the next quarter were disappointing and customer growth declined.
PagerDuty provided the weakest full-year outlook update in the group. The company lost 76 customers for a total of 15,044. The stock is flat since the results and is currently trading at $18.25.
Read our full analysis of PagerDuty’s results here.
JFrog (NASDAQ:FROG)
JFrog (NASDAQ:FROG), named after its founders’ affinity for frogs, offers a software-as-a-service platform that makes developing and releasing software easier and faster, especially for large teams.
JFrog reported revenue of $103 million, up 22.4% year over year. This number met analysts’ expectations. Let’s take a step back: it was a slower quarter as revenue expectations for the next quarter were disappointing and growth among major customers slowed.
JFrog performed the weakest among its peers, according to analyst estimates. The company has added 17 business customers paying more than $100,000 annually, bringing the total to 928. The stock has fallen 14.1% since reporting and is currently trading at $29.26.
Read our full, actionable report on JFrog here. It’s free.
Datadog (NASDAQ:DDOG)
Named after a database that the founders had to painstakingly maintain 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 revenue of $645.3 million, up 26.7% year over year. This result exceeded analyst expectations by 3.2%. More broadly, it was a slower quarter as it also saw an impressive increase in analyst billing estimates, but growth at major customers slowed.
The company added 50 business customers paying more than $100,000 annually, bringing the total to 3,390. The stock is up 6% since reporting and is currently trading at $114.66.
Read our full, actionable report on Datadog here. It’s free.
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