Many enterprise software stocks are adding to their big 2020 gains on Thursday, as investors take heart in a batch of strong earnings reports that were posted on Wednesday afternoon.
Zscaler (ZS) - Get Zscaler, Inc. Report is up 24.3%, Okta (OKTA) - Get Okta, Inc. Class A Report is up 6.9%, Snowflake (SNOW) - Get Snowflake, Inc. Class A Report is up 16%, Elastic (ESTC) - Get Elastic NV Report is up 14.2% and CrowdStrike (CRWD) - Get CrowdStrike Holdings, Inc. Class A Report is up 15.1% after each company comfortably beat its October quarter estimates and (generally speaking) issued strong guidance. And a number of other software names appear to be catching sympathy bids.
Palantir Technologies (PLTR) - Get Palantir Technologies Inc. Class A Report, which tumbled yesterday on a Morgan Stanley downgrade, is up 8.8%. Smartsheet (SMAR) - Get Smartsheet, Inc. Class A Report is up 6.8%, Datadog (DDOG) - Get Datadog Inc Class A Report is up 4.8%, Unity Software (U) - Get Unity Software, Inc. Report is up 5.2%, ZoomInfo (ZI) - Get ZoomInfo Technologies Inc Report is up 5.1%, Tenable Holdings (TENB) - Get Tenable Holdings, Inc. Report is up 5.4% and Asana (ASAN) - Get Asana, Inc. Class A Report is up 5.2%. DocuSign (DOCU) - Get DocuSign, Inc. Report, which reports after the bell, is up 6.1%.
While the aforementioned reporting companies differ from each other in terms of what they sell and (in many cases) how they sell it, they each reported strong double-digit sales and billings growth, while offering an upbeat view of the demand environment that they’re currently seeing.
Zscaler, the owner of a cloud-based security platform, reported 52% annual sales growth and 64% billings growth. Okta, an identity/access management software provider, reported 42% revenue growth and 44% billings growth.
Elastic, which sells a slew of software tools underpinned by the Elasticsearch search/analytics engine, reported 43% revenue growth and 42% billings growth. Crowdstrike, an endpoint security software provider, reported 86% revenue growth and 50% billings growth.
And Snowflake -- the most richly-valued of the reporting companies -- reported 119% revenue growth. The cloud data warehousing provider also disclosed that its remaining performance obligation (RPO - all the future revenue it has under contract) rose 35% sequentially and 240% annually, amid an ongoing mix shift from annual to multi-year contracts.
The machine data analytics leader, which still gets a large portion of its revenue from on-premise rather than cloud software deployments, is down 20% after badly missing October quarter sales/billings estimates and issuing weaker-than-expected January quarter guidance. Splunk’s revenue was down 11% annually during its October quarter, while its billings fell 22%.
Though Splunk’s post-earnings tumble does act as a cautionary example of how investors are prone to react when a high-multiple software firm’s numbers disappoint, markets for now still seem eager to drive additional multiple expansion for those software vendors that continue posting strong top-line figures.