The end of the earnings season is always a good time to take a step back and see who shined (and who not so much). Let’s take a look at how software development stocks fared in Q3, starting with Datadog (NASDAQ:DDOG).
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.
Thankfully, share prices of the companies have been resilient as they are up 8.1% on average since the latest earnings results.
Datadog (NASDAQ:DDOG)
Named after a database the founders had to painstakingly look after at their previous company, Datadog (NASDAQ:DDOG) is a software-as-a-service platform that makes it easier to monitor cloud infrastructure and applications.
Datadog reported revenues of $690 million, up 26% year on year. This print exceeded analysts’ expectations by 3.8%. Overall, it was a very strong quarter for the company with a solid beat of analysts’ annual recurring revenue estimates and EPS guidance for next quarter exceeding analysts’ expectations.
"Datadog executed well in the third quarter, with 26% year-over-year revenue growth. We continued to broaden our platform to help our customers observe, secure, and act on their mission-critical cloud applications," said Olivier Pomel, co-founder and CEO of Datadog.
Interestingly, the stock is up 21% since reporting and currently trades at $155.29.
Best Q3: JFrog (NASDAQ:FROG)
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 a solid beat of analysts’ billings estimates and accelerating growth in large customers.
Although it had a fine quarter compared its peers, the market seems unhappy with the results as the stock is down 5.3% since reporting. It currently trades at $31.13.
Is now the time to buy JFrog? Access our full analysis of the earnings results here, it’s free.
Weakest Q3: Akamai (NASDAQ:AKAM)
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%. Still, it was a slower quarter as it posted full-year revenue guidance inline with analysts’ expectations.
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 6.1% since the results and currently trades at $98.01.
Read our full analysis of Akamai’s results here.
Cloudflare (NYSE:NET)
Founded by two grad students of Harvard Business School, Cloudflare (NYSE:NET) is a software as a service platform that helps improve security, reliability and loading times of internet applications and websites.
Cloudflare reported revenues of $430.1 million, up 28.2% year on year. This result topped analysts’ expectations by 1.4%. Overall, it was a strong quarter as it also produced an impressive beat of analysts’ EBITDA estimates and full-year EPS guidance exceeding analysts’ expectations.
The stock is up 16.7% since reporting and currently trades at $111.64.
Read our full, actionable report on Cloudflare here, it’s free.
Twilio (NYSE:TWLO)
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 print surpassed analysts’ expectations by 3.7%. It was a very strong quarter as it also put up EPS guidance for next quarter exceeding analysts’ expectations and an impressive beat of analysts’ EBITDA estimates.
The company added 4,000 customers to reach a total of 320,000. The stock is up 53.2% since reporting and currently trades at $108.07.
Read our full, actionable report on Twilio here, it’s free.
Market Update
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% in November), 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 potential trade policy changes and corporate tax discussions, which could impact business confidence and growth. The path forward holds both optimism and caution as new policies take shape.
Want to invest in winners with rock-solid fundamentals? Check out our 9 Best Market-Beating Stocks and add them to your watchlist. These companies are poised for growth regardless of the political or macroeconomic climate.
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