Vertical Software Stocks Q3 In Review: 2U (NASDAQ:TWOU) Vs Peers
As the craze of earnings season draws to a close, here's a look back at some of the most exciting (and some less so) results from Q3. Today we are looking at the vertical software stocks, starting with 2U (NASDAQ:TWOU).
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 17 vertical software stocks we track reported a weaker Q3; on average, revenues beat analyst consensus estimates by 1.1% while next quarter's revenue guidance was 1.5% below consensus. Inflation (despite slowing) has investors prioritizing near-term cash flows, but vertical software stocks held their ground better than others, with the share prices up 13.7% on average since the previous earnings results.
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 $229.7 million, down 1.1% year on year, topping analyst expectations by 2.5%. It was a mixed quarter for the company, with a significant improvement in its gross margin but full-year revenue guidance missing analysts' expectations.
"Our edX platform uniquely positions us to capitalize on the demand shift to more skill-based courses and the advancements in technology, including AI, with our diverse portfolio of offerings," said Christopher "Chip" Paucek, Co-Founder and Chief Executive Officer of 2U.
The stock is down 57.1% since the results and currently trades at $1.02.
Is now the time to buy 2U? Access our full analysis of the earnings results here, it's free.
Best Q3: 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 $113.6 million, up 11.2% year on year, outperforming analyst expectations by 4.1%. It was a very strong quarter for the company, with optimistic revenue guidance for the next quarter and a decent beat of analysts' revenue estimates.
The stock is up 37.3% since the results and currently trades at $28.14.
Is now the time to buy Doximity? Access our full analysis of the earnings results here, it's free.
Weakest Q3: 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 $134.6 million, down 16.1% year on year, falling short of analyst expectations by 3.7%. It was a weak quarter for the company, with underwhelming revenue guidance for the next quarter and a miss of analysts' revenue estimates.
Upstart had the weakest performance against analyst estimates and slowest revenue growth in the group. The stock is up 21.2% since the results and currently trades at $35.64.
Read our full analysis of Upstart's results here.
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 $155 million, up 7.1% year on year, falling short of analyst expectations by 0.4%. It was a slower quarter for the company, with a miss of analysts' revenue estimates and full-year revenue guidance missing analysts' expectations.
The stock is up 42.3% since the results and currently trades at $42.39.
Read our full, actionable report on Q2 Holdings here, it's free.
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 $57.79 million, up 22.3% year on year, surpassing analyst expectations by 2.6%. It was a strong quarter for the company, with a significant improvement in its net revenue retention rate and optimistic revenue guidance for the next quarter.
The stock is down 10.8% since the results and currently trades at $5.22.
Read our full, actionable report on Olo here, it's free.
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The author has no position in any of the stocks mentioned
