Tech earnings season is long and extends over six weeks. We are finally nearing the end of Q3 earnings season as the last round of cloud companies are expected to report in early December. The I/O Fund had previously highlighted Six Cloud Stocks to Watch During Q3 Earnings, all of which have since reported Q3 results.
One of the notable performers we highlighted was Bill.com, which reported an 11% topline beat during the quarter. I/O Fund analyst Bradley Cipriano discussed the company’s strong Q3 results in a short video presentation here.
In the analysis that follows, we provide an update on the cloud category and review cloud stocks that have yet to report Q3 earnings. We also discuss key metrics that investors should be aware of heading into the final weeks of Q3 earnings season.
Cloud Stocks: Top 10 EV/FWD Revenue Multiples
Below is a table of cloud stocks that have yet to report Q3 results, ranked by their EV/FWD sales multiples. Snowflake has the richest multiple out of the 26 remaining cloud stocks set to report in the next few weeks. As we mentioned in our initial Q3 Cloud Earnings Overview, Snowflake is benefitting from increasing rates of data consumption, a trend that will likely continue into the future.
Somewhat cheaper than Snowflake but still sporting a premium multiple are Asana, Zscaler, and MongoDB. Asana most recently grew 72% YoY, an acceleration from the 61% and 57% YoY growth rate in Q2 and Q1, respectively. Zscaler sales grew over 55% for three consecutive quarters and sales are expected to grow 50% in the upcoming quarter. MongoDB has reported an acceleration in sales for three consecutive quarters, and the most recent 44% YoY growth was the fastest pace of growth since Q1 2020. These strong growth trends help illustrate why these firms have premium valuations.
Cloud Stocks: Top 10 Three-Month Forward YoY Growth Rates
Below is a chart of forward sales growth expectations.
Out of the remaining cloud stocks that must report Q3 earnings, Snowflake and Kingsoft are expected to grow the fastest. Snowflake is expected to grow sales 92% YoY as the company continues to benefit from rising rates of data consumption.
Chinese cloud infrastructure company, Kingsoft, is also expected to grow sales strongly in Q3 as they quickly scale their operations.
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Other noteworthy mentions are CrowdStrike, Okta, and Zscaler, all of which have exposure to cyber security, a sector that has seen outsized growth recently. These three cyber security firms are expected to grow sales ~50% YoY heading into Q3 earnings, highlighting the overall strength in the cyber security market.
Top 10 Weekly Share Price Movements
Below is a table of the weekly change in share price for our universe of cloud stocks (week ended 11/19). Zscaler is a notable stand out and increased 6% during the week. It is up 85% YTD. Out of the 26 cloud stocks that have yet to report Q3 earnings, Zscaler and Snowflake were the only stocks that advanced last week.
Top 10 Changes in Sales Growth Estimates – Last 90 Days
The table below ranks cloud companies that have yet to report Q3 earnings by their topline revisions over the last 90 days. An increase in topline revisions signals that the Street believes that the company will grow faster than initially believed.
Smartsheet (SMAR) has had the largest topline revision, as the company recently increased their Q3 sales guidance from 40% YoY growth to 46% YoY growth, citing a robust demand environment for its platform.
Zscaler also had its topline revisions increase 5% over the last 90 days, above other cyber security players such as CrowdStrike and Okta. This increase in expectations signals that Zscaler is likely expected to outperform its peers in the near term.
Update on Top 5 EV/Fwd Revenue Multiples:
Overall stats:
- Overall Cloud forward median: 15x
