Vertical Software Stocks Q2 In Review: Upstart (NASDAQ:UPST) Vs Peers

Looking back on vertical software stocks’ Q2 earnings, we examine this quarter’s best and worst performers, including Upstart (NASDAQ:UPST) 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 12.6% on average since the latest earnings results.

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 $127.6 million, down 6% year on year. This print exceeded analysts’ expectations by 2.5%. Despite the top-line beat, it was still a mixed quarter for the company with optimistic revenue guidance for the next quarter but a decline in its gross margin.

“The guidance we released today demonstrates that we’re on track toward resuming our role as the fintech known for high growth and healthy margins,” said Dave Girouard, CEO, Upstart.

Interestingly, the stock is up 57.6% since reporting and currently trades at $37.60.

Is now the time to buy Upstart? 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 happy with the results as the stock is up 5.4% since reporting. It currently trades at $5.05.

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. The stock is flat since the results and currently trades at $177.78.

Read our full analysis of PTC’s results here.

Unity (NYSE:U)

Started as a game studio by three friends in a Copenhagen apartment, Unity (NYSE:U) is a software as a service platform that makes it easier to develop and monetize new games and other visual digital experiences.

Unity reported revenues of $449.3 million, down 15.8% year on year. This result topped analysts’ expectations by 1.7%. Aside from that, it was a mixed quarter with a miss of analysts’ billings estimates.

Unity had the slowest revenue growth among its peers. The stock is up 60.2% since reporting and currently trades at $23.

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

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 result surpassed analysts’ expectations by 1.7%. Aside from that, it was a mixed quarter as it also recorded a solid beat of analysts’ billings estimates but a decline in its gross margin.

The stock is down 5.7% since reporting and currently trades at $270.90.

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

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