Software Development Stocks Q3 Teardown: PagerDuty (NYSE:PD) Vs The Rest
The end of an earnings season can be a great time to discover new stocks and assess how companies are handling the current business environment. Let’s take a look at how PagerDuty (NYSE:PD) and the rest of the software development stocks fared in Q3.
As legendary VC investor Marc Andreessen says, "Software is eating the world", and it touches virtually every industry. That drives increasing demand for tools helping software developers do their jobs, whether it be monitoring critical cloud infrastructure, integrating audio and video functionality, or ensuring smooth content streaming.
The 11 software development stocks we track reported a strong Q3. As a group, revenues beat analysts’ consensus estimates by 3.3% while next quarter’s revenue guidance was 0.7% above.
In light of this news, share prices of the companies have held steady as they are up 3.8% on average since the latest earnings results.
PagerDuty (NYSE:PD)
Started by three former Amazon engineers, PagerDuty (NYSE:PD) is a software-as-a-service platform that helps companies respond to IT incidents fast and make sure that any downtime is minimized.
PagerDuty reported revenues of $118.9 million, up 9.4% year on year. This print exceeded analysts’ expectations by 2.2%. Overall, it was a satisfactory quarter for the company with accelerating customer growth but a miss of analysts’ billings estimates.
“PagerDuty delivered a solid quarter with revenue and non-GAAP operating income results well above third quarter guidance ranges with annual recurring revenue increasing to $483 million, growing 10% year-over-year,” said Chairperson and CEO, Jennifer Tejada.
PagerDuty Total Revenue
Unsurprisingly, the stock is down 12.8% since reporting and currently trades at $18.26.
Named after the founders' affinity for frogs, JFrog (NASDAQ:FROG) provides a software-as-a-service platform that makes developing and releasing software easier and faster, especially for large teams.
JFrog reported revenues of $109.1 million, up 23% year on year, outperforming analysts’ expectations by 3.3%. The business had a very strong quarter with an impressive beat of analysts’ billings estimates and accelerating growth in large customers.
JFrog Total Revenue
Although it had a fine quarter compared to its peers, the market seems unhappy with the results as the stock is down 11.3% since reporting. It currently trades at $29.16.
Founded in 1999 by two engineers from MIT, Akamai (NASDAQ:AKAM) provides software for organizations to efficiently deliver web content to their customers.
Akamai reported revenues of $1.00 billion, up 4.1% year on year, exceeding analysts’ expectations by 0.5%. It was a slower quarter: Akamai beat analysts’ EBITDA expectations this quarter. On the other hand, its revenue guidance for next quarter missed analysts’ expectations and its full-year revenue guidance slightly missed Wall Street’s estimates.
Akamai delivered the weakest performance against analyst estimates, slowest revenue growth, and weakest full-year guidance update in the group. As expected, the stock is down 8.3% since the results and currently trades at $95.72.
Started in 1999 by David Morken who was later joined by Henry Kaestner as co-founder in 2001, Bandwidth (NASDAQ:BAND) provides thousands of customers with a software platform that uses its own global network to provide phone numbers, voice, and text connectivity.
Bandwidth reported revenues of $193.9 million, up 27.5% year on year. This print surpassed analysts’ expectations by 6.5%. It was a very strong quarter as it also put up a solid beat of analysts’ EBITDA estimates and revenue guidance for next quarter exceeding analysts’ expectations.
Bandwidth pulled off the biggest analyst estimates beat and highest full-year guidance raise among its peers. The stock is down 9.6% since reporting and currently trades at $17.03.
Founded in 2008 by Jeff Lawson, a former engineer at Amazon, Twilio (NYSE:TWLO) is a software as a service platform that makes it really easy for software developers to use text messaging, voice calls and other forms of communication in their apps.
Twilio reported revenues of $1.13 billion, up 9.7% year on year. This result topped analysts’ expectations by 3.7%. Overall, it was a very strong quarter as it also produced EPS guidance for next quarter exceeding analysts’ expectations and a solid beat of analysts’ EBITDA estimates.
The company added 4,000 customers to reach a total of 320,000. The stock is up 53.5% since reporting and currently trades at $108.30.
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 has 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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