Q3 Earnings Highlights: Guidewire (NYSE:GWRE) Vs The Rest Of The Vertical Software Stocks
Let’s dig into the relative performance of Guidewire (NYSE:GWRE) and its peers as we unravel the now-completed Q3 vertical software earnings season.
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 4 vertical software stocks we track reported a strong Q3. As a group, revenues beat analysts’ consensus estimates by 1.8% while next quarter’s revenue guidance was 2% above.
Amidst this news, share prices of the companies have had a rough stretch. On average, they are down 5.5% since the latest earnings results.
Guidewire (NYSE:GWRE)
Founded by two individuals involved in the development of leading procurement software Ariba, Guidewire (NYSE:GWRE) offers insurance companies a software-as-a-service platform to help sell their products and manage their workflows.
Guidewire reported revenues of $262.9 million, up 26.8% year on year. This print exceeded analysts’ expectations by 3.5%. Overall, it was a very strong quarter for the company with a solid beat of analysts’ EBITDA estimates and an impressive beat of analysts’ billings estimates.
“We continue to see great momentum as P&C insurers look to Guidewire to deliver the platform they trust to innovate and grow efficiently,” said Mike Rosenbaum, chief executive officer, Guidewire.
Guidewire Total Revenue
Guidewire scored the fastest revenue growth and highest full-year guidance raise of the whole group. Investor expectations, however, were likely higher than Wall Street’s published projections, leaving some wishing for even better results (analysts’ consensus estimates are those published by big banks and advisory firms, not the investors who make buy and sell decisions). The stock is down 12.4% since reporting and currently trades at $181.
Founded in 2000 as a business unit within MicroStrategy, Alarm.com (NASDAQ:ALRM) is a software-as-a-service platform that enables users to control their security systems and smart home appliances from a single app.
Alarm.com reported revenues of $240.5 million, up 8.4% year on year, outperforming analysts’ expectations by 3.9%. The business had an exceptional quarter with a solid beat of analysts’ EBITDA estimates and full-year EBITDA guidance exceeding analysts’ expectations.
Alarm.com Total Revenue
Alarm.com delivered the biggest analyst estimates beat among its peers. The market seems happy with the results as the stock is up 6.7% since reporting. It currently trades at $60.96.
Founded by brothers Keith and Barry Bentley, Bentley Systems (NASDAQ:BSY) offers a software-as-a-service platform that addresses the lifecycle of infrastructure projects such as road networks, tunnel systems, and wastewater facilities.
Bentley reported revenues of $335.2 million, up 9.3% year on year, falling short of analysts’ expectations by 1.7%. It was a slower quarter as it posted a slight miss of analysts’ billings estimates and EBITDA in line with analysts’ estimates.
Bentley delivered the weakest performance against analyst estimates in the group. As expected, the stock is down 9.7% since the results and currently trades at $45.05.
Boasting major consumer staples and pharmaceutical companies as clients, Manhattan Associates (NASDAQ:MANH) offers a software-as-service platform that helps customers manage their supply chains.
Manhattan Associates reported revenues of $266.7 million, up 11.8% year on year. This result topped analysts’ expectations by 1.3%. It was a very strong quarter as it also recorded an impressive beat of analysts’ EBITDA estimates and full-year EPS guidance exceeding analysts’ expectations.
Manhattan Associates had the weakest full-year guidance update among its peers. The stock is down 6.6% since reporting and currently trades at $273.43.
Thanks to the Fed's series of rate hikes in 2022 and 2023, inflation has cooled significantly from its post-pandemic highs, drawing closer to the 2% goal. This disinflation has occurred without severely impacting economic growth, suggesting the success of a soft landing. The stock market thrived in 2024, spurred by recent rate cuts (0.5% in September and 0.25% each in November and December), and a notable surge followed Donald Trump's presidential election win in November, propelling indices to historic highs. Nonetheless, the outlook for 2025 remains clouded by the pace and magnitude of future rate cuts as well as potential changes in trade policy and corporate taxes once the Trump administration takes over. The path forward is marked by uncertainty.
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