Q2 Sales Software Earnings: Freshworks (NASDAQ:FRSH) Impresses

Earnings results often indicate what direction a company will take in the months ahead. With Q2 behind us, let’s have a look at Freshworks (NASDAQ:FRSH) and its peers.

Companies need to be able to interact with and sell to their customers as efficiently as possible. This reality coupled with the ongoing migration of enterprises to the cloud drives demand for cloud-based customer relationship management (CRM) software that integrates data analytics with sales and marketing functions.

The 4 sales software stocks we track reported a mixed Q2. As a group, revenues were in line with analysts’ consensus estimates while next quarter’s revenue guidance was 1.2% below.

Big picture, the Federal Reserve has a dual mandate of inflation and employment. The former had been running hot throughout 2021 and 2022 but cooled towards the central bank's 2% target as of late. This prompted the Fed to cut its policy rate by 50bps (half a percent) in September 2024. Given recent employment data that suggests the US economy could be wobbling, the markets will be assessing whether this rate and future cuts (the Fed signaled more to come in 2024 and 2025) are the right moves at the right time or whether they're too little, too late for a macro that has already cooled.

In light of this news, sales software stocks have held steady with share prices up 1.3% on average since the latest earnings results.

Best Q2: Freshworks (NASDAQ:FRSH)

Founded in Chennai, India in 2010 with the idea of creating a “fresh” helpdesk product, Freshworks (NASDAQ: FRSH) offers a broad range of software targeted at small and medium-sized businesses.

Freshworks reported revenues of $174.1 million, up 20% year on year. This print exceeded analysts’ expectations by 3%. Overall, it was a very strong quarter for the company with accelerating growth in large customers and an impressive beat of analysts’ billings estimates.

“Freshworks delivered a solid Q2, growing revenue to $174.1 million with a free cash flow margin of 19%,” said Dennis Woodside, CEO & President of Freshworks.

Freshworks scored the biggest analyst estimates beat and highest full-year guidance raise of the whole group. The company added 1,195 enterprise customers paying more than $5,000 annually to reach a total of 21,744. Investor expectations, however, were likely higher than Wall Street’s published projections, leaving some wishing for even better results (analysts’ consensus estimates are those published by big banks and advisory firms, not the investors who make buy and sell decisions). The stock is down 15.3% since reporting and currently trades at $11.25.

We think Freshworks is a good business, but is it a buy today? Read our full report here, it’s free.

HubSpot (NYSE:HUBS)

Started in 2006 by two MIT grad students, HubSpot (NYSE:HUBS) is a software-as-a-service platform that helps small and medium-sized businesses market themselves, sell, and get found on the internet.

HubSpot reported revenues of $637.2 million, up 20.4% year on year, outperforming analysts’ expectations by 2.9%. The business had a satisfactory quarter with a decent beat of analysts’ billings estimates.

HubSpot scored the fastest revenue growth among its peers. The company added 11,214 customers to reach a total of 228,054. The market seems happy with the results as the stock is up 14.3% since reporting. It currently trades at $526.60.

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

Weakest Q2: ZoomInfo (NASDAQ:ZI)

Founded in 2007 as DiscoveryOrg and renamed after a merger in 2019, ZoomInfo (NASDAQ:ZI) is a software as a service product that provides sales departments with access to a database of prospective clients.

ZoomInfo reported revenues of $291.5 million, down 5.5% year on year, falling short of analysts’ expectations by 5.3%. It was a softer quarter as it posted underwhelming revenue guidance for the next quarter and a miss of analysts’ billings estimates.

ZoomInfo delivered the weakest performance against analyst estimates, slowest revenue growth, and weakest full-year guidance update in the group. The company added 37 enterprise customers paying more than $100,000 annually to reach a total of 1,797. Interestingly, the stock is up 1.8% since the results and currently trades at $10.

Read our full analysis of ZoomInfo’s results here.

Salesforce (NYSE:CRM)

Launched in 1999 from a rented one-bedroom apartment in San Francisco by Marc Benioff and his three co-founders, Salesforce (NYSE:CRM) is a software-as-a-service platform that helps companies access, manage, and share sales information.

Salesforce reported revenues of $9.33 billion, up 8.4% year on year. This print met analysts’ expectations. Taking a step back, it was a mixed quarter: While revenue guidance for next quarter missed analysts’ expectations, full year revenue guidance was reconfirmed.

The stock is up 4.2% since reporting and currently trades at $269.99.

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

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