Winners And Losers Of Q2: 2U (NASDAQ:TWOU) Vs The Rest Of The Vertical Software Stocks

As we reflect back on the just completed Q2 vertical software sector earnings season, we dig into the relative performance of 2U (NASDAQ:TWOU) 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, there are industries that have very specific needs. Whether it is life-sciences, education or banking, the demand for so called vertical software, addressing industry specific workflows, is growing, fueled by the pressures on improving productivity and quality of offerings.

The 17 vertical software stocks we track reported a slower Q2; on average, revenues beat analyst consensus estimates by 1.45%, while on average next quarter revenue guidance was 2.63% under consensus. Increasing interest rates hurt growth companies as investors search for near-term cash flows and vertical software stocks have not been spared, with share prices down 15.9% since the previous earnings results, on average.

2U (NASDAQ:TWOU)

Originally named 2tor after the founder's dog Tor, 2U (NASDAQ:TWOU) provides software for universities and colleges to deliver online degree programs and courses.

2U reported revenues of $222.1 million, down 8.02% year on year, missing analyst expectations by 5.15%. It was a weak quarter for the company, with a miss of analysts' revenue estimates and a decline in its gross margin.

"2U's platform strategy is thriving and delivering sustainable double-digit margins driven by content velocity, product innovation, marketing effectiveness and operational efficiency," said Christopher "Chip" Paucek, Co-Founder and CEO of 2U.

2U delivered the weakest performance against analyst estimates of the whole group. The stock is down 46.9% since the results and currently trades at $2.27.

Read our full report on 2U here, it's free.

Best Q2: Toast (NYSE:TOST)

Founded by three MIT engineers at a local Cambridge bar, Toast (NYSE:TOST) provides integrated point of sale (POS) hardware, software, and payments solutions for restaurants.

Toast reported revenues of $978 million, up 44.9% year on year, beating analyst expectations by 3.46%. It was a milestone beat-and-raise quarter for Toast as it won a deal with Marriott, exceeded $1 billion in ARR, and reached adjusted EBITDA profitability and positive free cash flow for the first time since the IPO. On top of that, the company raised its revenue and adjusted EBITDA guidance for the full year, topping analysts' expectations.

The stock is down 14% since the results and currently trades at $17.39.

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

Weakest Q2: Matterport (NASDAQ:MTTR)

Founded in 2011 before any mass market VR headset was released, Matterport (NASDAQ:MTTR) provides the hardware and software necessary to turn real world spaces into 3D visualization.

Matterport reported revenues of $39.6 million, up 38.9% year on year, in line with analyst expectations. It was a weak quarter for the company, with revenue guidance for the next quarter and full-year missing analysts' expectations.

The stock is down 31.1% since the results and currently trades at $2.17.

Read our full analysis of Matterport's results here.

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 $542.3 million, up 17.3% year on year, beating analyst expectations by 3.41%. It was a weaker quarter for the company, with underwhelming revenue and non-GAAP EPS guidance for the next quarter. Similarly, its full-year revenue and non-GAAP EPS guidance missed Wall Street's expectations.

The stock is down 3.14% since the results and currently trades at $139.63.

Read our full, actionable report on PTC here, it's free.

Upstart (NASDAQ:UPST)

Founded by the former head of Google's enterprise business Dave Girouard, Upstart (NASDAQ:UPST) is an AI-powered lending platform that helps banks better evaluate the risk of lending money to a person and provide loans to more customers.

Upstart reported revenues of $135.8 million, down 41.1% year on year, in line with analyst expectations. It was a weak quarter for the company, with transaction volume missing expectations and down significantly year on year. Also the conversion on rate requests was 9%, below the expectation of 10%. Finally, both revenue and adjusted EBITDA guidance for next quarter missed analysts' estimates and its gross margin declined.

Upstart had the slowest revenue growth among the peers. The stock is down 48.8% since the results and currently trades at $26.5.

Read our full, actionable report on Upstart here, it's free.

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The author has no position in any of the stocks mentioned