Shares of Veeva Systems (VEEV +0.35%) were rallying on Thursday, up 9% as of 12:44 p.m. ET.
The cloud-based software company reported strong earnings last night that exceeded analysts' estimates, along with strong bottom-line guidance for the coming quarter.
NYSE: VEEV
Key Data Points
A discounted Veeva comes in strong
Veeva stock had not been a technology highflier this year, and was up just 3.5% on the year coming into the report. The stock was also down 42% from its 2021 all-time high when software stocks were bid up to extremely high valuations.
Therefore, shares may have been primed for a bounce on good news. And Veeva delivered, with revenue growing 15% in the quarter, but, more importantly, the subscription part of revenue, which is the recurring part of the business that encompasses 83% of the top line, growing an even stronger 19%. Adjusted (non-GAAP) earnings per share grew by 33% to $1.62, demonstrating nice operating leverage as more revenue fell to the bottom line.
In addition, the company guided for Q3 revenue between $682 million and $685 million, with adjusted EPS between $1.57 and $1.58. That top-line guidance actually came in slightly below estimates for $685.9 million, but the bottom-line guidance was above estimates of $1.55.
CEO Peter Gassner noted in the press release and conference call with analysts that Veeva had also garnered some big strategic wins in the quarter, which paved the way for more growth. In one quote, Gassner noted that on the company's customer relationship management (CRM) product, "I think we're winning virtually every CRM deal. You certainly never know if you're winning all of them, but it certainly feels like we're winning all of them."
Veeva looks like a promising software play
Software stocks have generally lagged their AI hardware tech counterparts this year, but Veeva looks like a potential way to play a software renaissance. The company trades around 32 times its adjusted earnings estimates for fiscal 2026, which ends in January 2026. That's not that demanding a valuation for a profitable, recurring-subscription business growing its bottom line at 33% as the company did this past quarter, especially if interest rates come down, as many expect.
Of note, Veeva also has about $5 billion in cash and no debt, accounting for 16% of its market cap, which makes the stock even cheaper than it looks. All in all, Veeva looks like a promising software play, even after today's bounce.
