Software Stocks Weekly Summary: Who Are the Winners?

This week, earnings reports from multiple software stocks (including SaaS companies) showed that many companies exceeded revenue expectations, while GAAP EPS displayed a mixed/divergent trend.

On November 3, $Palantir (PLTR.US )$ reported earnings that beat market expectations, but the stock still fell notably in after-hours trading due to its elevated valuation. $Hims & Hers Health (HIMS.US )$ exceeded revenue expectations, but its gross margin was below both the prior quarter and the year-ago period. Shifts in the weight-loss drug market landscape led the company to lower prices for generics.

In reports released on November 4, $Spotify Technology (SPOT.US )$ significantly beat expectations. Monthly active users (MAU) rose to 713 million, topping the 711 million consensus. By contrast, $Shopify (SHOP.US )$ and $Tempus AI (TEM.US )$ showed profitability pressures. Although Shopify’s AI-driven store traffic has increased sevenfold since the start of the year and GMV rose significantly, gross margin declined. Free trial promotions in subscriptions and a change in the reporting scope for the PayPal-related business helped revenue but weighed on gross margin, leading to continued year-over-year contraction in gross margins for both subscription and merchant solutions this quarter. In addition, total expenses grew about 25.5% year over year this quarter, roughly in line with last quarter’s pace and remaining elevated. Because expense growth outpaced growth in gross profit dollars, this had a dilutive effect on margins.

Among companies reporting on November 5, $Applovin (APP.US )$ beat expectations. Despite facing an SEC investigation, e-commerce advertising revenue grew rapidly, driven by its AI ad engine AXON 2.0. $Figma Inc (FIG.US )$ ’s revenue also exceeded expectations, but a slowdown in customer growth and further margin compression raised market concerns.

In results released on November 6, $Datadog (DDOG.US )$ and $Affirm Holdings (AFRM.US )$ beat market expectations on both revenue and GAAP EPS. Affirm benefited from growth in payment GMV, the card business user base, and active consumers.

Software/SaaS sector is expected to be more resilient amid market turbulence

SaaS companies' product development relies solely on domestic software developers and is not involved in the long supply chains of manufacturing, thus minimizing geopolitical risks in supply.
SaaS companies use a fixed rate pricing model, unlike the advertising industry’s market-following pricing. Stable pricing contributes to steady revenue growth.
Moreover, the demand side for SaaS companies is predominantly domestic (or Western) customers. For example, $Salesforce (CRM.US )$'s US customer base accounted for 61.7% in fiscal 2025. Customers in the Asia-Pacific region only accounted for 10.19%. $Snowflake (SNOW.US )$'s fiscal 2025 US revenue accounted for 76.15%.
The industry uses a subscription model, which creates customer loyalty, and the churn rate is lower than that of non-subscription companies.