By Sam Boughedda
In a note on software stocks Tuesday, Morgan Stanley analysts told investors that Palantir's (NYSE:PLTR) government business is decelerating as Federal software demand softens, while Zscaler (NASDAQ:ZS) is gaining traction.
"Palantir's government business decelerates as reflected by our tracker which is in-line with company guidance contemplating no 'new major US government awards', but strong renewals and contracts such as the recent $229M US Army Research lab deal which does not show up in our data yet likely offsets the slowdown," wrote the analysts.
They added that "Zscaler is seeing significant traction in the federal vertical," which is evidenced by the firm's federal award data picking up a +49% YoY increase in TCV booked this year.
This is on the back of "Zscaler reaching FedRAMP High Authorization in August and landing a $46M 5-year deal in the same quarter (Zscaler received a low seven-figure ACV task order against this award for ZIA and ZPA)," the analysts added.
Both Palantir and Zscaler shares are down so far on Tuesday at -0.42% and -0.73%, respectively.