Breaking News
Get Actionable Insights with InvestingPro+: Start 7 Day FREE Trial Register here
Investing Pro 0
Ad-Free Version. Upgrade your experience. Save up to 40% More details

Earnings Show That Most Software Stocks Are Faring Better Than Expected

By The Tokenist (Shane Neagle)Stock MarketsAug 05, 2022 11:08AM ET
Earnings Show That Most Software Stocks Are Faring Better Than Expected
By The Tokenist (Shane Neagle)   |  Aug 05, 2022 11:08AM ET
Saved. See Saved Items.
This article has already been saved in your Saved Items

We’re in the midst of the Q2 reporting season, with analysts assessing the overall situation as better-than-feared. The Q2 earnings season EPS beat rate is at 68% so far, better than the historical average earnings beat rate of 67%.

Yesterday, several prominent high-growth software stocks reported earnings. Here’s how they performed given the extremely challenging macroeconomic backdrop.

Twilio Falls After Cutting Guidance

Shares of Twilio Inc (NYSE:TWLO) are down almost 9% in premarket trading Friday after the company provided Q3 guidance that missed consensus estimates, adding to investors’ concerns that companies could further cut spending amid economic turmoil.

Twilio reported a Q2 adjusted loss per share of 11c, compared to the estimated loss per share of 11c. Revenue increased 41% year-over-year to $943.4 million in the second quarter, topping the consensus estimates of $918.2 million.

While earnings and revenue in Q2 beat expectations, the company’s customer demand metrics came lower than expected. Twilio said it added 7,000 new customers in the period, while analysts expected 7,313. Furthermore, the dollar-based net expansion rate, which serves as an indicator of growth among current customers, stood at 123%, while analysts estimated 127.3%.

Twilio expects revenue to rise roughly 31% to $970 million for the current quarter ending in September, also below the consensus projection of $975.6 million. The company also expects an adjusted loss per share to be 43c in the third quarter, while analysts were expecting a narrower loss per share of 11c. Twilio CEO Jeff Lawson said in an interview:

“We have not seen broad-based impacts to our business yet because of the macroeconomy (...) We’re preparing ourselves for various outcomes that could come, but we are cautiously optimistic.”

The communication solutions provider also slowed down hiring recently, except for several key areas. The company also shut down numerous offices, reporting a total of 8,510 employees at the end of June.

Twilio hiked prices in North America for its flagship customer texting software. JPMorgan’s Mark Murphy said the move could bear fruit in the second half of the year, particularly because upcoming U.S. midterm elections are expected to boost demand for political messaging services in the country.

Atlassian Delivers Another Beat

Shares of the Australian software maker Atlassian Corp (NASDAQ:TEAM) surged sharply in after-hours trading after the company reported better-than-expected revenue for the fiscal fourth quarter ended June 30.

Atlassian reported a net income of $68.1 million, or 27c per share, compared to $62.2 million, or 24c per share in the year-ago period. Revenue came in at $759.8 million, up 36% year-over-year, just below the consensus projection of $760 million.

Atlassian reported a Q4 net loss of $105.5 million, compared to a $213.1 million loss in the year-ago period. Operating loss stood at $63.3 million in the fourth quarter, up from a $7.5 million loss in the same period last year. The company reported $1.5 billion in cash, cash equivalents, and short-term investments.

Atlassian’s strongest metric in the quarter was the number of customers. The Sydney-based software company reported 242,623 customers in Q4, up 8,084 from Q3. Its headcount increased by 634 from the last quarter to 8,813, up 2,300 compared to the year-ago quarter.

For the full fiscal 2022, the company reported a non-GAAP EPS loss of $2.42, down from $2.72 in the year-ago period. Full-year revenue totaled $2.8 billion, up 34% from the previous fiscal year.

Mike Cannon-Brookes, co-founder and co-CEO of Atlassian, said:

“We believe that Atlassian is uniquely positioned, with great momentum and a differentiated business model. While we can’t predict what the future holds at a macro level, we’re forging ahead with conviction and vigilance as we look to deepen our strategic position.”

For the fiscal Q1 2023, the software maker expects adjusted EPS from 37c to 38c, in line with analysts’ estimates. The company forecasts first-quarter revenue of $795 million to $810 million, well above the consensus estimate of $773.5 million.

Cloudflare Also Beats On Strong Cybersecurity Demand

Cloudflare (NYSE:NET) stock price also rose higher Thursday after the company reported better-than-expected Q2 results and raised its guidance for the full fiscal year.

The cybersecurity firm reported a Q2 loss of $63.5 million, or 20 cents per share, compared to a loss of $35.5 million, or 12 cents per share, in the same period last year. Cloudflare reported a Q2 loss per share of 20c, while adjusted earnings stood at 1c per share in the three-month period. This compares to analysts’ expectations of a loss per share of 1c.

Revenue came in at $234.5 million, up from $152.4 million in the year-ago period and above the analyst consensus of $227.3 million.

The company said its robust revenue growth was “driven by strength in our large customers, and a record number of large customer additions,” according to Matthew Prince, Cloudflare’s CEO and co-founder. “I’m confident Cloudflare will continue to grow stronger even through the tough economic times that may be ahead,” he added.

For the third quarter, Cloudflare said it expects non-GAAP net earnings per share to be between $0.00 and $0.01, compared to analysts’ estimated earnings of a penny per share. The company expects Q3 revenue in the range of $250 million to $251 million, above the estimates of $246.9 million.

For the full fiscal year, Cloudflare now expects revenue to be in the range of $968 million to $972 million, up from the previous forecast of $955 million to $959 million. The company still expects full-year EPS to be 3 cents to 4c, with analysts also expecting 3c per share.

HubSpot Beats

Software maker HubSpot (NYSE:HUBS) also reported better-than-expected Q2 results, sending its shares rising Thursday.

The company reported Q2 adjusted EPS of 44c, compared to 43c in the year-ago quarter and estimates of 43c per share. Revenue came in at $421.8 million, up 36% YoY, topping the expected $409.5 million.

Subscription revenue rose 37% year-over-year to $412.4 million, above the consensus projection of $398.6 million. Professional services and other revenue stood at $9.35 million, missing the expectations of $11.3 million.

HubSpot reported total average subscription revenue per customer of $11,198, topping the estimates of $10.894. The number of customers in the quarter totaled 150,865, up 25% year-over-year and just above the estimated 150,832.

For Q3, the company expects adjusted EPS in the range of 50c to 52c, slightly missing the consensus estimates of 53c per share. Adjusted revenue is expected to range between $425 million to $426 million, also below the expectations of $438.5 million.

On a full-year basis, HubSpot expects adjusted EPS in the range of $2.28 to $2.30, down from the previous outlook of $2.40 to $2.42 per share, while analysts were expecting $2.36 per share.

The marketing and sales software maker expects full-year revenue of $1.69 billion to $1.70 billion, down from the earlier forecast of $1.72 billion to $1.73 billion and compared to analyst estimates of $1.72 billion. HubSpot remains a popular stock among the leading stock trading apps, commonly used by retail investors due to their mobility and easy-to-use interfaces.

Bottom Line

The Q2 earnings season for high-growth software stocks is going better than expected so far despite the slowing economic activity that will likely weigh on cooperative spending. Still, there’s a long way to recover from this year’s selloff as iShares Expanded Tech-Software Sector ETF (NYSE:IGV) remains down over 23% YTD, despite a 17%+ rebound from the June lows.

Earnings Show That Most Software Stocks Are Faring Better Than Expected

Related Articles

Earnings Show That Most Software Stocks Are Faring Better Than Expected

Add a Comment

Comment Guidelines

We encourage you to use comments to engage with other users, share your perspective and ask questions of authors and each other. However, in order to maintain the high level of discourse we’ve all come to value and expect, please keep the following criteria in mind:  

  •            Enrich the conversation, don’t trash it.

  •           Stay focused and on track. Only post material that’s relevant to the topic being discussed. 

  •           Be respectful. Even negative opinions can be framed positively and diplomatically. Avoid profanity, slander or personal attacks directed at an author or another user. Racism, sexism and other forms of discrimination will not be tolerated.

  • Use standard writing style. Include punctuation and upper and lower cases. Comments that are written in all caps and contain excessive use of symbols will be removed.
  • NOTE: Spam and/or promotional messages and comments containing links will be removed. Phone numbers, email addresses, links to personal or business websites, Skype/Telegram/WhatsApp etc. addresses (including links to groups) will also be removed; self-promotional material or business-related solicitations or PR (ie, contact me for signals/advice etc.), and/or any other comment that contains personal contact specifcs or advertising will be removed as well. In addition, any of the above-mentioned violations may result in suspension of your account.
  • Doxxing. We do not allow any sharing of private or personal contact or other information about any individual or organization. This will result in immediate suspension of the commentor and his or her account.
  • Don’t monopolize the conversation. We appreciate passion and conviction, but we also strongly believe in giving everyone a chance to air their point of view. Therefore, in addition to civil interaction, we expect commenters to offer their opinions succinctly and thoughtfully, but not so repeatedly that others are annoyed or offended. If we receive complaints about individuals who take over a thread or forum, we reserve the right to ban them from the site, without recourse.
  • Only English comments will be allowed.

Perpetrators of spam or abuse will be deleted from the site and prohibited from future registration at’s discretion.

Write your thoughts here
Are you sure you want to delete this chart?
Post also to:
Replace the attached chart with a new chart ?
Your ability to comment is currently suspended due to negative user reports. Your status will be reviewed by our moderators.
Please wait a minute before you try to comment again.
Thanks for your comment. Please note that all comments are pending until approved by our moderators. It may therefore take some time before it appears on our website.
Are you sure you want to delete this chart?
Replace the attached chart with a new chart ?
Your ability to comment is currently suspended due to negative user reports. Your status will be reviewed by our moderators.
Please wait a minute before you try to comment again.
Add Chart to Comment
Confirm Block

Are you sure you want to block %USER_NAME%?

By doing so, you and %USER_NAME% will not be able to see any of each other's's posts.

%USER_NAME% was successfully added to your Block List

Since you’ve just unblocked this person, you must wait 48 hours before renewing the block.

Report this comment

I feel that this comment is:

Comment flagged

Thank You!

Your report has been sent to our moderators for review
Continue with Google
Sign up with Email