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Overreactions in the market are a common phenomenon, particularly when it comes to earnings reports. While sometimes the market's knee-jerk reaction appears to be completely untethered from the reality of a company's quarterly numbers, oftentimes these divergences can be traced back to extremes in a stock's valuation or investor sentiment - and sometimes, both.
Here we have three tech companies that made wild moves after reporting earnings, even as all of them beat quarterly earnings estimates and raised their guidance. While shares of two stocks surged in response, the other stock sold off on the apparently upbeat news.
Of course, for investors who are in it for the long haul, what matters most is the long-term fundamental prospects of each company. Here's a closer look at the quarterly results from this trio, along with the latest outlook from each.
#1. Freshworks
Founded in 2010, Freshworks (FRSH) is a software company that develops customer engagement and support solutions, mainly targeted at small and medium-sized enterprises (SMEs). It provides software-as-a-service (SaaS) products designed to enhance customer support, engagement, and service delivery. The company's market cap currently stands at about $5 billion.
FRSH stock has had a tough year so far, falling 30.9% on a YTD basis.
However, the company's latest Q3 numbers gave FRSH a serious boost, with the stock soaring 28.5% on Nov. 7 after the results. Quarterly earnings and revenue surpassed estimates, and management also raised its revenue outlook.
Notably, revenues rose by 22% from the previous year to $186.6 million, while EPS of $0.11 represented growth of 37.5% annually. This marked the 11th consecutive quarter that FRSH beat Wall Street's EPS estimates.
Revenue guidance for the full year was raised to be between $713.6 million and $716.6 million, up from the prior range of $707 million to $713 million.
Net cash from operating activities for the quarter came in at $42.3 million, up from $23.9 million in the year-ago period, as the company closed the quarter with a cash balance of $391.1 million and no short-term debt on its books.
Key operating metrics, such as the number of customers contributing more than $5,000 in annual recurring revenue (ARR) was 22,359, an increase of 14% year-over-year.
Freshworks’ key competitive advantage is its affordability, which allows it to win deals even against larger industry players. This affordability, combined with an intuitive setup and scalable capabilities, appeals to customers seeking efficient solutions without the complexity and high costs of larger platforms. The Freshworks platform leverages artifical intelligence (AI)-driven automation through Freddy AI, streamlining customer interactions and employee support, and significantly enhancing operational efficiency.
Freddy AI, in particular, has seen impressive early success, with ARR tied to the product nearly doubling sequentially from Q1 2024 to Q2 2024. Freshworks says that paid copilot adoption grew more than 35% over the previous quarter to over 1,700 paying customers in Q3, with plans to directly monetize usage of the CX version of Freddy AI when it moves from the beta version to general availability in Q1 of 2025.
Overall, analysts remain optimistic about FRSH stock, which has an average rating of “Moderate Buy” and a mean target price of $17.80. This denotes an upside potential of about 9.8% from current levels. Out of 17 analysts covering the stock, 8 have a “Strong Buy” rating, 1 has a “Moderate Buy” rating and 8 have a “Hold” rating.
#2. Rapid7
Based out of Boston, Rapid7 (RPD) is a cybersecurity and analytics company that focuses on helping businesses detect, respond to, and manage security threats. Over the years, Rapid7 has evolved into a prominent player in cybersecurity by offering solutions that combine threat detection, vulnerability management, and analytics. A member of the small-cap benchmark Russell 2000 Index (RUT), RPD's market cap is currently $2.5 billion.
RPD stock is down 29.4% on a YTD basis, although its results for the latest quarter sparked some buying interest.
In Q3, Rapid7's total revenues rose by 8% from the prior year to $214.7 million, with product subscriptions rising by the same rate to $206 million. EPS improved by 32% in the same period to $0.66, coming in way ahead of the consensus estimate of $0.52. Moreover, this marked the 10th consecutive quarterly earnings beat from RPD.
The number of customers at the end of the quarter stood at 11,619, with an ARR per customer of $70.80 - both improved from 11,412 and $68.10, respectively, in the year-ago period.
Net cash from operating activities jumped to about $44 million from $3.7 million in the previous year, as the company exited the quarter with a cash balance of $222.6 million. This was much higher than the short-term debt levels of about $62 million.
Management raised its full-year revenue outlook to a range between $839 million and $841 million, versus the prior guidance range of $833 million to $837 million.
Overall, analysts are projecting forward revenue and earnings growth rates of 9.06% and 88.34%, well above the sector medians of 5.69% and 7.22%, respectively.
With its strong balance sheet and growing operations, RPD should continue to benefit from the tool consolidation trend, potentially driven by the pressure on IT spend and the lack of adequate talents to highly specialize on specific areas of cybersecurity.
Analysts have deemed RPD stock a “Moderate Buy” overall, with a mean target price of $44.33, which denotes an upside potential of roughly 11.2% from current levels. Out of 21 analysts covering the stock, 7 have a “Strong Buy” rating, 1 has a “Moderate Buy” rating, and 13 have a “Hold” rating.
#3. Dynatrace
We conclude our list with Dynatrace (DT), a global leader in software intelligence, specializing in observability, application performance monitoring (APM), and automation solutions powered by AI. The company provides a unified observability and application performance monitoring platform designed to help organizations understand and optimize complex, cloud-native applications and IT environments. DT's market cap currently stands at $16 billion.
DT stock is down 3.6% on a YTD basis, lagging the broader market.
Dynatrace reported solid fiscal Q2 of 2025 numbers and raised its revenue outlook for the year, but the news failed to boost the company's stock. DT reported total revenues of $418 million, up 19% year over year, led by growth of 20% in core subscription revenues to $400 million. Adjusted EPS for the quarter came in at $0.37, up 19.4% from the prior year to surpass the consensus estimate of $0.32. Remarkably, this was the 16th consecutive quarter that DT beat Wall Street's bottom-line estimates.
Cash flow from operating activities increased to $254.4 million for the six months ended Sept. 30, up from $170.8 million in the year-ago period. Overall, the company closed the quarter with a cash balance of $907.2 million, much higher than its short-term debt levels of $15.6 million.
Dynatrace also raised its revenue guidance for the year to a range between $1.665 million and $1.675 million, slightly higher than its earlier forecast of $1.644 million to $1.658 million.
Analysts are optimistic about the company's growth potential. While the average revenue growth forecast of 18.61% is sharply higher than the sector median of 5.69%, the forward earnings growth is pegged at 23.76%, compared to the sector median of 8.06%.
Dynatrace's management remains optimistic about the company's prospects as businesses increasingly move away from isolated point solutions to adopt fully integrated, end-to-end platforms. This shift positions Dynatrace to capture greater market share in the coming years, supported by its product innovation roadmap, which emphasizes enhanced productivity, cost efficiencies, improved security, and superior user experiences.
Additionally, Dynatrace is focusing on expanding its partner network and strengthening its internal sales team to secure large enterprise clients, particularly those with the highest ARR potential. Simultaneously, the company is working to deepen the adoption of its product suite among existing customers, driving further engagement and growth within its user base.
Analysts are optimistic about DT stock, which has an average rating of “Strong Buy” and a mean target price of $61.00, representing expected upside potential of roughly 16% from current levels. Out of 31 analysts covering the stock, 23 have a “Strong Buy” rating, 1 has a “Moderate Buy” rating, and 7 have a “Hold” rating.
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