As the second quarter 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 enabling automation that has evolved from simple one- or two-step workflows to more complex processes that are integral to enterprises. The result is an increasing demand for modern automation software.
The six automation software stocks we track reported a strong second quarter. As a group, revenues exceeded analyst consensus expectations by 2.8%, while revenue expectations for the next quarter were in line.
After much tension, the Federal Reserve lowered its policy interest rate by 50 basis points (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 targeted anti-inflation campaign since the 1980s. Inflation started to spike in 2021 following the COVID-19 crisis due to a confluence of factors such as supply chain disruptions, labor shortages and stimulus spending. While CPI (inflation) numbers have been positive recently, employment measures have raised some concerns. Going forward, markets will debate whether this rate cut (and more potential rate cuts in 2024 and 2025) is the perfect timing to support the economy, or whether it’s a bit too late for a macro that’s already too much cooled down.
Fortunately, automation software stocks have remained resilient, with share prices up an average of 6.3% since the last earnings results.
Microsoft (NASDAQ:MSFT)
Microsoft (NASDAQ:MSFT), short for microcomputer software, is the world’s largest software vendor with its Windows operating system, Office suite and cloud computing services.
Microsoft reported revenue of $64.73 billion, up 15.2% year over year. This print was in line with analyst expectations, and overall it was a satisfying quarter for the company, with revenue meeting analyst expectations. Looking down at the P&L, operating results and earnings per share increased slightly.
Microsoft had the weakest performance compared to analyst estimates across the group. The market has likely priced in the results and the stock is flat since reporting. It is currently trading at $419.20.
Is Now the Time to Buy Microsoft? See our full analysis of earnings results here. It’s free.
Best Second Quarter: Pegasystems (NASDAQ:PEGA)
Founded in 1983 by Alan Trefler, Pegasystems (NASDAQ:PEGA) provides a software-as-a-service platform for automating and optimizing customer service and engagement workflows.
Pegasystems reported revenue of $351.2 million, up 17.7% year over year, beating analyst expectations by 8.1%. The company had an exceptional quarter with solid improvement in analyst expectations and gross margin improvement.
Pegasystems delivered the highest analyst earnings forecast among its peers. The market seems pleased with the results, as the stock is up 21% since reporting. It is currently trading at $73.99.
Is Now the Time to Buy Pegasystems? See our full analysis of earnings results here. It’s free.
Weakest Quarter 2: Appian (NASDAQ:APPN)
Appian (NASDAQ:APPN), founded by Matt Calkins and his three friends from an apartment in Northern Virginia, sells a software platform that lets users build applications without using much code, allowing them to create new software faster.
Appian reported revenue of $146.5 million, up 14.7% year over year, beating analyst expectations by 2.5%. Still, it was a slower quarter as analyst expectations were not met and gross margin fell.
Appian provided the weakest full-year outlook update in the group. As expected, the stock has fallen 13.8% since the results and is currently trading at $31.88.
Read our full analysis of Appian’s results here.
UiPath (NYSE:PATH)
Founded in 2005 in Romania as a technology outsourcing company, UiPath (NYSE:PATH) makes software that helps companies automate repetitive computing tasks.
UiPath reported revenue of $316.3 million, up 10.1% year over year. This print exceeded analyst expectations by 4.1%. It was a very strong quarter as it also delivered an impressive number of analyst expectations and full-year revenue expectations that exceeded analyst expectations.
UiPath achieved the highest full-year guidance increase, but had the slowest revenue growth among its peers. The stock is flat since reporting and is currently trading at $12.71.
Read our full, actionable report on UiPath here. It’s free.
ServiceNow (NYSE:NU)
ServiceNow (NYSE:NOW), founded by Fred Luddy, who wrote the code for the company’s first prototype on a flight from San Francisco to London, offers a software-as-a-service platform that helps companies become more efficient by allowing them to automate workflows for IT, HR and customer service.
ServiceNow reported revenue of $2.63 billion, up 22.2% year over year. This result was in line with analyst expectations. It was a strong quarter as it also saw accelerating growth among major customers and a solid improvement in analyst billing estimates.
ServiceNow achieved the fastest revenue growth among its competitors. The company added 55 enterprise customers paying more than $1 million annually, bringing the total to 1,988. The stock is up 29.1% since reporting and is currently trading at $944.63.
Read our full, actionable report on ServiceNow here. It’s free.
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