SAAS models are being adapted swiftly by companies to transform their operations. Further, the growing adoption of advanced technologies and the need for the latest solutions have been rising considerably, boosting the SAAS industry’s outlook.
Given the industry tailwinds, it could be wise to invest in high-growth SAAS stocks Twilio Inc. (TWLO), Informatica Inc. (INFA), and DocuSign, Inc. (DOCU), which are transforming business operations.
Gartner projects worldwide IT spending to grow at 9.8% in 2025 to a total of $5.62 trillion, where segments like data center systems, devices, and software will grow at double-digit rates driven by the wide adoption of generative AI. Further, 2025 software spending is expected to grow by 14.2% to reach 1.25 trillion in 2025.
Increasingly, companies are leaning towards the SAAS model for its agility and cost-effectiveness. Industries, including construction, industrial, healthcare, and finance, are adapting industry-specific SaaS applications to target their individual needs, resulting in rapid transformation in business operations.
With this, revenue in the worldwide software as a service (SAAS) market is projected to reach around $390.50 billion in 2025. The market is expected to exhibit growth at a CAGR of 19.4%, resulting in a market volume of $793.10 billion by 2029. In 2025, the majority of revenue will be generated in the U.S. of $221.50 billion.
Increased digital transformation efforts around various industries are driving the global SAAS market. Also, recently increased strategic partnerships and collaborations for business development have been observed among major industry players, which is navigating market growth opportunities.
Besides, the rise in the adoption of public & hybrid cloud-based solutions and centralized data-driven analytics are fueling the SAAS market demand. Amid such trends, companies delivering SAAS applications and solutions are positioned for high growth in the future.
With these encouraging trends in mind, let’s delve into the fundamentals of the three Software - SAAS stock picks, beginning with the third choice.
Stock #3: Twilio Inc. (TWLO)
TWLO is an international provider of customer engagement platform solutions. The company operates through two segments, Twilio Communications and Twilio Segment. It offers various application programming interfaces and software solutions for communications between customers and end users.
On December 2, 2024, TWLO launched Linked Audiences in the Twilio Segment for Amazon Redshift, available in public beta. The integration allows Twilio Segment and AWS customers to build audiences, enrich customer profiles, and scalable personalization.
The companies’ customers gain expanded capabilities to drive smarter, more personalized customer interactions and stronger business outcomes with the integration.
On October 1, 2024, TWLO announced an integration in collaboration with OpenAI to bring the company’s new Realtime API to the Twilio platform. The integration of streaming speech-to-speech capabilities, part of the Realtime API, enables over 300,000 TWLO customers and more than 10 million developers to build powerful conversational AI virtual agents.
For the third quarter of 2024, which ended September 30, TWLO’s revenue increased 9.7% year-over-year to $1.13 billion. Its gross profit was $578.63 million, representing an increase of 12.1% compared to the prior year's quarter. Also, the company’s non-GAAP income from operations grew 33.7% from the year-ago value to $182.42 million.
In addition, non-GAAP net income attributable to common stockholders came in at $163.92 million or $1.02 per share, up 53.6% and 75.9% from the prior year’s quarter, respectively.
For the fourth quarter of 2024, TWLO projects its revenue to be $1.15 billion - $1.16 billion. Its non-GAAP income from operations is expected to be $185-$195 million. Further, the company expects its non-GAAP EPS to be $0.95 to $1.00.
For the full year, the company has raised its non-GAAP income from operations guidance to $700 million to $710 million from the prior range of $650 - $675 million.
Analysts expect TWLO’s revenue for the fourth quarter (ended December 2024) to increase 9.9% year-over-year to $1.18 billion. The company’s EPS is expected to grow 20.1% year-over-year to $1.03 over the same quarter. Also, it has topped the consensus revenue and EPS estimates in all four trailing quarters.
Shares of TWLO have increased 144.6% over the past six months and 112% over the past year to close the last trading session at $146.57.
TWLO’s POWR Ratings reflect its robust outlook. The stock has an overall rating of B, which translates to a Buy in our proprietary rating system. The POWR Ratings are calculated by considering 118 different factors, with each factor weighted to an optimal degree.
TWLO has an A grade for Growth and a B for Sentiment. It is ranked #10 out of 18 stocks in the A-rated Software - SAAS industry.
In addition to the POWR Ratings we’ve stated above, we also have TWLO’s ratings for Value, Momentum, Stability, and Quality. Get all TWLO ratings here.
Stock #2: Informatica Inc. (INFA)
INFA develops an artificial intelligence-powered platform to connect, manage, and unify data across multi-vendor, multi-cloud, and hybrid systems at enterprise scale worldwide. Its platform includes a suite of interoperable data management products, including data integration products to ingest, transform, and integrate data, API and application integration products.
On January 14, 2025, INFA strengthened its Databricks partnership with native GenAI capabilities for Databricks data intelligence platform. The new collaboration includes deeper integration between INFA’s Intelligent data management cloud platform and the Databricks data intelligence platform.
With their extended partnership, INFA and Databricks are helping customers create and manage AI-ready data and Generative AI analytics on the Databricks Data Intelligence Platform.
On January 9, 2025, INFA expanded its partnership with Google Cloud through the availability of its Cloud Data Governance and Catalog (CDGC) on Google Cloud, which is available as a transactable offering on Google Cloud Marketplace. CDGC provides customers with a robust data governance and catalog solution with enhanced data trust, data democratization, and data delivery for Google Cloud customers.
During the third quarter that ended September 30, 2024, INFA reported total revenues of $422.48 million, up 3.4% year-over-year. The company’s non-GAAP income from operations rose 18% from the prior-year quarter to $151.04 million. Also, the company’s non-GAAP net income amounted to $88.95 million, or $0.28 per share, reflecting growth of 10.3% and 3.7% over the previous-year period, respectively.
Furthermore, the company’s adjusted EBITDA increased 17.1% year-over-year to $154.79 million. And its adjusted free cash flow rose 85.5% year-over-year to $107.78 million.
Street expects INFA’s revenue for the fourth quarter (ended December 2024) to increase 2.7% year-over-year to $457.04 million. Further, for the same period, the company’s EPS is estimated to grow 17.4% year-over-year to $0.38. Additionally, INFA topped the consensus EPS and revenue estimates in three of the trailing four quarters.
Over the past six months, INFA’s stock has surged 10.5% to close the last trading session at $25.58.
INFA’s sound fundamentals are reflected in its POWR Ratings. The stock has an overall rating of B, which translates to a Buy in our proprietary rating system.
The stock has a B grade for Quality and Growth. Within the Software - SAAS industry, INFA is ranked #7 of 18 stocks.
Click here to access additional ratings of INFA for Momentum, Value, Sentiment, and Stability.
Stock #1: DocuSign, Inc. (DOCU)
DOCU provides electronic signature solutions internationally. It offers e-signature solutions, Contract Lifecycle Management (CLM), Document Generation, and Gen for Salesforce. It also provides Identify, Standards-Based Signatures, Monitor that uses advanced analytics, Notary, and Web Forms.
On November 20, 2024, DOCU introduced Docusign for Developers, a powerful suite of tools and resources designed for developers, partners, and entrepreneurs to revolutionize agreement management. The launch enabled businesses to integrate, extend, and scale solutions on DOCU’s IAM platform, enhancing seamless workflows, advanced insights, and a thriving ecosystem.
DOCU’s total revenue increased 7.8% year-over-year to $754.82 million for the third quarter, which ended October 31, 2024. The company’s non-GAAP gross profit came in at $622.37 million, indicating a 7% increase over the previous year’s period. Also, its non-GAAP income from operations rose 19% year-over-year to $223.08 million.
Furthermore, the company’s non-GAAP net income stood at $188.50 million or $0.90 per share, up 15.1% and 13.9% from the prior year’s quarter, respectively.
Analysts expect DOCU’s revenue for the fourth quarter (ended January 2025) to increase 6.8% year-over-year to $760.94 million. The consensus EPS estimate for the same quarter of $0.84 indicates an 11.1% year-over-year growth. Moreover, DOCU surpassed the consensus revenue and EPS estimates in all four trailing quarters.
DOCU’s stock has surged 94.1% over the past six months and 81.4% over the past year to close the last trading session at $96.50.
DOCU’s POWR Ratings reflect its robust outlook. The stock has an overall rating of A, which translates to a Strong Buy in our proprietary rating system.
DOCU has an A grade for Quality and a B grade for Growth. It is ranked #4 among 18 stocks in the same industry.
To access DOCU’s other ratings (Value, Sentiment, Stability, and Momentum), click here.
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TWLO shares were trading at $144.79 per share on Tuesday afternoon, down $1.78 (-1.21%). Year-to-date, TWLO has gained 33.97%, versus a 2.53% rise in the benchmark S&P 500 index during the same period.
About the Author: Rjkumari Saxena
Rajkumari started her career as a writer but gradually shifted her focus to financial journalism, leveraging her educational background in Commerce. Fascinated by the interplay of business and economic shifts in equities, she aspires to evolve as an analyst. With a knack for simplifying complex financial concepts, her mission is to empower investors with insights that lead to profitable decisions.
3 High-Growth SaaS Companies Transforming Business Operations StockNews.com
