Looking back on vertical software stocks’ Q2 earnings, we examine this quarter’s best and worst performers, including Q2 Holdings (NYSE: QTWO) and its peers.

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 14 vertical software stocks we track reported a very strong Q2. As a group, revenues beat analysts’ consensus estimates by 4.1% while next quarter’s revenue guidance was in line.

Amidst this news, share prices of the companies have had a rough stretch. On average, they are down 8.4% since the latest earnings results.

Q2 Holdings (NYSE: QTWO)

With a platform powering digital services for approximately 25 million account holders across America, Q2 Holdings (NYSE: QTWO) provides cloud-based digital solutions that help financial institutions, fintechs, and alternative finance companies deliver modern banking experiences to their customers.

Q2 Holdings reported revenues of $195.1 million, up 12.9% year on year. This print exceeded analysts’ expectations by 0.8%. Overall, it was an exceptional quarter for the company with a solid beat of analysts’ annual recurring revenue estimates and an impressive beat of analysts’ billings estimates.

Q2 Holdings delivered the weakest performance against analyst estimates of the whole group. Unsurprisingly, the stock is down 34.3% since reporting and currently trades at $59.18.

Is now the time to buy Q2 Holdings? Access our full analysis of the earnings results here, it’s free for active Edge members.

Best Q2: Upstart (NASDAQ: UPST)

Using over 2,500 data variables and trained on nearly 82 million repayment events, Upstart (NASDAQ: UPST) is an AI-powered lending platform that uses machine learning to help banks and credit unions more accurately assess borrower risk for personal loans, auto loans, and home equity lines of credit.

Upstart reported revenues of $257.3 million, up 102% year on year, outperforming analysts’ expectations by 13.6%. The business had a stunning quarter with EBITDA guidance for next quarter exceeding analysts’ expectations and a solid beat of analysts’ EBITDA estimates.

Upstart achieved the biggest analyst estimates beat and fastest revenue growth among its peers. Although it had a fine quarter compared its peers, the market seems unhappy with the results as the stock is down 43% since reporting. It currently trades at $47.12.

Is now the time to buy Upstart? Access our full analysis of the earnings results here, it’s free for active Edge members.

Weakest Q2: Agilysys (NASDAQ: AGYS)

With a tech stack that powers everything from check-in to checkout at some of the world's top hospitality venues, Agilysys (NASDAQ: AGYS) develops and provides cloud-based and on-premise software solutions for hotels, resorts, casinos, and restaurants to manage operations and enhance guest experiences.

Agilysys reported revenues of $76.68 million, up 20.7% year on year, exceeding analysts’ expectations by 3.1%. Still, it was a slower quarter as it posted a significant miss of analysts’ EBITDA estimates.

Agilysys delivered the weakest full-year guidance update in the group. As expected, the stock is down 6.8% since the results and currently trades at $109.20.

Read our full analysis of Agilysys’s results here.

Cadence Design Systems (NASDAQ: CDNS)

Powering the chips behind everything from smartphones to AI accelerators for over 35 years, Cadence Design Systems (NASDAQ: CDNS) provides essential computational software, hardware, and intellectual property used by engineers to design and verify advanced electronic systems and semiconductors.

Cadence Design Systems reported revenues of $1.28 billion, up 20.2% year on year. This result beat analysts’ expectations by 1.8%. Overall, it was a very strong quarter as it also produced a solid beat of analysts’ EBITDA estimates and an impressive beat of analysts’ billings estimates.

The stock is down 3.6% since reporting and currently trades at $321.71.

Read our full, actionable report on Cadence Design Systems here, it’s free for active Edge members.

PTC (NASDAQ: PTC)

Originally known as Parametric Technology Corporation until its 2013 rebranding, PTC (NASDAQ: PTC) provides software that helps manufacturers design, develop, and service physical products through digital solutions for CAD, PLM, ALM, and SLM.

PTC reported revenues of $643.9 million, up 24.2% year on year. This print surpassed analysts’ expectations by 10.4%. It was an exceptional quarter as it also put up EPS guidance for next quarter exceeding analysts’ expectations and a solid beat of analysts’ EBITDA estimates.

PTC achieved the highest full-year guidance raise among its peers. The stock is down 2.1% since reporting and currently trades at $199.07.

Read our full, actionable report on PTC here, it’s free for active Edge members.

Market Update

In response to the Fed’s rate hikes in 2022 and 2023, inflation has been gradually trending down from its post-pandemic peak, trending closer to the Fed’s 2% target. Despite higher borrowing costs, the economy has avoided flashing recessionary signals. This is the much-desired soft landing that many investors hoped for. The recent rate cuts (0.5% in September and 0.25% in November 2024) have bolstered the stock market, making 2024 a strong year for equities. Donald Trump’s presidential win in November sparked additional market gains, sending indices to record highs in the days following his victory. However, debates continue over possible tariffs and corporate tax adjustments, raising questions about economic stability in 2025.

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