The broader software sector saw a dip in performance during Q4, but infrastructure-focused companies such as Palantir (NASDAQ:PLTR), MongoDB (NASDAQ:MDB), and others continued to post strong results, according to Morgan Stanley.
In a research note led by analyst Keith Weiss, Morgan Stanley said the software group overall showed quarter-over-quarter declines in revenue growth, operating margins, and earnings beats. Fewer firms exceeded consensus by more than 1%, and the size of those beats also shrank, falling below historical norms.
In Q4, 64% of software companies beat revenue estimates by over 1%, down from 71% in Q3. For earnings per share, 69% beat estimates by at least $0.02, also slightly lower than the 71% in the previous quarter.
However, infrastructure software companies defied the trend. SolarWinds (NYSE:SWI) beat revenue estimates by 7.2%, Palantir by 6.6%, MongoDB by 5.6%, and Elastic (NYSE:ESTC) by 4.5%. Overall, 80% of companies in this segment exceeded revenue estimates by over 1%, and 85% beat EPS expectations by more than $0.02.
Palantir, in particular, stood out. Despite high expectations heading into earnings season, the company delivered its sixth straight quarter of accelerating revenue and improving fundamentals. It was the second-best performing stock in the infrastructure software group, Morgan Stanley noted.
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