The end of earnings season is always a good time to take a step back and look at who’s excelling (and who’s not so good). Let’s take a look at how software development stocks fared in the second quarter, starting with JFrog (NASDAQ:FROG).
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 6.3% since the last earnings results.
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 print was in line with analyst expectations, but overall it was a softer quarter for the company with disappointing revenue expectations for the next quarter and slowing growth among major customers.
“We are on a mission to revolutionize the software industry with a unified platform that encompasses EveryOps and streamlines the flow of the software chain,” said Shlomi Ben Haim, co-founder and CEO of JFrog.
JFrog had the weakest performance against analyst estimates of the entire group. The company added 17 business customers paying more than $100,000 annually, bringing the total to 928. Unsurprisingly, the stock has fallen 14.1% since reporting and is currently trading at $29.26.
Is Now the Time to Buy JFrog? See our full analysis of earnings results 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 achieved 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.
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.
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 result exceeded analyst expectations by 1.4%. Taking a step back, it was a softer quarter as analyst expectations were not met.
F5 had the slowest sales growth among its competitors. The stock is up 23.2% since reporting and is currently trading at $219.
Read our full, actionable report on F5 here. It’s free.
Cloudflare (NYSE:NET)
Founded by two Harvard Business School students, Cloudflare (NYSE:NET) is a software-as-a-service platform that helps improve the security, reliability, and load times of Internet applications and websites.
Cloudflare reported revenue of $401 million, up 30% year over year. This print exceeded analyst expectations by 1.6%. More generally, it was a weaker quarter as analyst expectations were not met.
The stock is up 9.3% since reporting and is currently trading at $81.35.
Read our full, actionable report on Cloudflare here. It’s free.
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