Cloud Software Stocks Rip Higher After Strong Earnings from Snowflake, Others

Snowflake, Zscaler, Okta, Elastic and Crowdstrike all soundly beat their October quarter estimates on the back of strong revenue and billings growth.
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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 Report is up 24.3%, Okta  (OKTA) - Get Report is up 6.9%, Snowflake  (SNOW) - Get Report is up 16%, Elastic  (ESTC) - Get Report is up 14.2% and CrowdStrike  (CRWD) - Get 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 Report, which tumbled yesterday on a Morgan Stanley downgrade, is up 8.8%. Smartsheet  (SMAR) - Get Report is up 6.8%, Datadog  (DDOG) - Get Report is up 4.8%, Unity Software  (U) - Get Report is up 5.2%, ZoomInfo  (ZI) - Get Report is up 5.1%, Tenable Holdings  (TENB) - Get Report is up 5.4% and Asana  (ASAN) - Get Report is up 5.2%. DocuSign  (DOCU) - Get 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 strong results are overshadowing weaker numbers from Splunk  (SPLK) - Get Report.

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.