Q2 Earnings Highs And Lows: Q2 Holdings (NYSE:QTWO) Vs The Rest Of The Vertical Software Stocks

As the Q2 earnings season comes to a close, it’s time to take stock of this quarter’s best and worst performers in the vertical software industry, including Q2 Holdings (NYSE:QTWO) and its peers.

Software is eating the world, and while a large number of solutions such as project management or video conferencing software can be useful to a wide array of industries, some have very specific needs. As a result, vertical software, which addresses industry-specific workflows, is growing and fueled by the pressures to improve productivity, whether it be for a life sciences, education, or banking company.

The 15 vertical software stocks we track reported a mixed Q2. As a group, revenues beat analysts’ consensus estimates by 1.9% while next quarter’s revenue guidance was 1.1% above.

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.

Luckily, vertical software stocks have performed well with share prices up 11% on average since the latest earnings results.

Q2 Holdings (NYSE:QTWO)

Founded in 2004 by Hank Seale, Q2 (NYSE:QTWO) offers software-as-a-service that enables small banks to provide online banking and consumer lending services to their clients.

Q2 Holdings reported revenues of $172.9 million, up 11.8% year on year. This print exceeded analysts’ expectations by 1.1%. Overall, it was a strong quarter for the company with an impressive beat of analysts’ billings estimates and a narrow beat of analysts’ ARR (annual recurring revenue) estimates.

“We closed out the first half of the year with solid sales execution and financial results,” said Q2 Chairman and CEO Matt Flake.

Interestingly, the stock is up 15.3% since reporting and currently trades at $77.83.

Is now the time to buy Q2 Holdings? Access our full analysis of the earnings results here, it’s free.

Best Q2: Olo (NYSE:OLO)

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

Olo reported revenues of $70.5 million, up 27.6% year on year, outperforming analysts’ expectations by 4.1%. The business had a very strong quarter with an impressive beat of analysts’ GMV (gross merchandise value) estimates and a solid beat of analysts’ billings estimates.

Olo scored the fastest revenue growth and highest full-year guidance raise among its peers. The market seems content with the results as the stock is up 2.1% since reporting. It currently trades at $4.89.

Is now the time to buy Olo? Access our full analysis of the earnings results here, it’s free.

Weakest Q2: PTC (NASDAQ:PTC)

Used to design the Airbus A380 and Boeing 787 Dreamliner commercial airplanes, PTC’s (NASDAQ:PTC) software-as-service platform helps engineers and designers create and test products before manufacturing.

PTC reported revenues of $518.6 million, down 4.4% year on year, falling short of analysts’ expectations by 2.8%. It was a softer quarter as it posted a miss of analysts’ billings estimates and a decline in its gross margin.

PTC delivered the weakest performance against analyst estimates and weakest full-year guidance update in the group. As expected, the stock is down 1.9% since the results and currently trades at $174.31.

Read our full analysis of PTC’s results here.

Cadence (NASDAQ:CDNS)

With the name chosen to reflect the idea of a repeating pattern or rhythm in electronic design, Cadence Design Systems (NASDAQ:CDNS) offers a software-as-a-service platform for semiconductor engineering and design.

Cadence reported revenues of $1.06 billion, up 8.6% year on year. This print surpassed analysts’ expectations by 1.7%. More broadly, it was a mixed quarter as it also produced a solid beat of analysts’ billings estimates but a decline in its gross margin.

The stock is down 8.5% since reporting and currently trades at $262.80.

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

Doximity (NYSE:DOCS)

Founded in 2010 and named for a combination of “docs” and “proximity”, Doximity (NYSE: DOCS) is the leading social network for U.S. medical professionals.

Doximity reported revenues of $126.7 million, up 16.8% year on year. This print topped analysts’ expectations by 5.7%. Aside from that, it was a mixed quarter as it also recorded optimistic revenue guidance for the next quarter but a miss of analysts’ billings estimates.

The stock is up 67.8% since reporting and currently trades at $43.07.

Read our full, actionable report on Doximity here, it’s free.

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