The stock market posted strong gains on Wednesday after Federal Reserve chair Jerome Powell made comments about monetary policy that spurred excitement among investors. With the possibility of interest rate increases slowing in the near future, the Nasdaq Composite (^IXIC -0.79%) jumped out to a gain of more than 4%. On Thursday morning, Nasdaq futures held their own, suggesting the index would hang on to its gains from the previous day.

Many investors have looked for signs of a turnaround in the Nasdaq, and one niche in the market that could provide a good gauge of market sentiment is the software-as-a-service (SaaS) industry. SaaS stocks have generally lost considerable ground over the past year, but the most recent financial results from Okta (OKTA -1.17%) and Splunk (SPLK) suggest that there are some bright spots among software companies that could lead the way in a recovery.

Okta secures gains

Shares of Okta jumped 18% in premarket trading on Thursday morning. The provider of identity verification services reported third-quarter financial results for the period ended Oct. 31 that showed continued growth and substantial progress toward profitability.

Okta's revenue for the quarter weighed in at $481 million, up 37% year over year. Subscription backlog as measured by remaining performance obligations climbed 21% to $2.85 billion, of which it expects to recognize more than half in the next 12 months. Calculated billings jumped at an even faster 37% rate to $532 million.

On its bottom line, Okta came close to breaking even, posting an adjusted loss of just $1 million for the period. Given its share count, that loss amounted to just a fraction of a penny per share that was small enough to round to $0.00.

Moreover, Okta sees ongoing progress ahead. For the fourth quarter, the identity verification software provider expects adjusted earnings of $0.09 to $0.10 per share, with revenue climbing 27% to 28% year over year. That would close a year of 41% sales growth for Okta and set the stage for a potential full year of profits in fiscal 2024, which has become increasingly important for investors to see in the current uncertain macroeconomic environment.

Investors like how Splunk is faring

Shares of Splunk were up nearly 9% in premarket trading Thursday morning, adding to gains in the previous day's session. Financial results for the fiscal third quarter ending Oct. 31 confirmed the high growth expectations that shareholders have for the data security and observation platform.

Splunk's revenue grew 40% to $930 million, driven largely by an even stronger 54% gain in sales from its cloud platform. The company posted a dollar-based net retention rate of 127% for its cloud product, showing that customers are not only sticking with the platform, but also spending more on it over time. Moreover, Splunk is drawing in some big spenders, with the number of clients generating annual recurring revenue of $1 million or more rising to more than 750.

Efforts to reduce costs are also paying off for Splunk. The software company actually spent less in operating expenses during the quarter than it did in the year-earlier period, demonstrating the scalability of its platform. That helped it post adjusted earnings of $0.83 per share, reversing a year-ago loss. Moreover, Splunk boosted its guidance for the full year, expecting almost $100 million more in sales with a new range of $3.455 billion to $3.485 billion. The software company also sees its free cash flow improving from cost-reduction measures.

Investors were also pleased that Splunk signed a new five-year strategic collaboration agreement with Amazon Web Services, extending a partnership that has helped give Splunk greater access to Amazon's large customer base. Combined with new leadership at the executive and board of directors levels, Splunk is moving forward in an attractive direction.