As the Q2 earnings season wraps, let’s dig into this quarter’s best and worst performers in the it services & other tech industry, including Applied Digital (NASDAQ: APLD) and its peers.
The IT and tech services subsector is poised for growth as businesses accelerate cloud adoption, AI-driven network automation, and edge computing deployments. While these seem like big, nebulous trends, they require very real products like switches and firewalls as well as implementation services. On the other hand, challenges on the horizon include intensifying competition from cloud-native networking providers, regulatory scrutiny over data privacy and cybersecurity, and potential supply chain constraints for networking hardware. While AI and automation will enhance network efficiency and security, they also introduce risks related to algorithmic bias, compliance complexity, and increased energy consumption.
The 20 it services & other tech stocks we track reported a mixed Q2. As a group, revenues beat analysts’ consensus estimates by 2.3% while next quarter’s revenue guidance was in line.
Luckily, it services & other tech stocks have performed well with share prices up 10.8% on average since the latest earnings results.
Best Q2: Applied Digital (NASDAQ: APLD)
Pivoting from its origins in cryptocurrency mining to become a key player in the AI infrastructure boom, Applied Digital (NASDAQ: APLD) designs and operates specialized data centers that provide high-performance computing infrastructure for artificial intelligence and blockchain applications.
Applied Digital reported revenues of $38.01 million, down 13% year on year. This print was in line with analysts’ expectations, and overall, it was a very strong quarter for the company with a beat of analysts’ EPS estimates.
“These long-term leases mark a defining moment for Polaris Forge 1, one of North America’s most ambitious data center projects,” said Wes Cummins, Chairman and CEO of Applied Digital.
Applied Digital delivered the slowest revenue growth of the whole group. Interestingly, the stock is up 164% since reporting and currently trades at $26.44.
Pure Storage (NYSE: PSTG)
Founded in 2009 as a pioneer in enterprise all-flash storage technology, Pure Storage (NYSE: PSTG) provides all-flash data storage hardware and software that helps organizations manage their data more efficiently across on-premises and cloud environments.
Pure Storage reported revenues of $861 million, up 12.7% year on year, outperforming analysts’ expectations by 1.7%. The business had a very strong quarter with an impressive beat of analysts’ billings and EPS estimates.
The market seems happy with the results as the stock is up 42.9% since reporting. It currently trades at $87.
Is now the time to buy Pure Storage? Access our full analysis of the earnings results here, it’s free for active Edge members.
Weakest Q2: Xerox (NASDAQ: XRX)
Pioneering the modern office copier and inventing technologies like Ethernet and the laser printer, Xerox (NASDAQ: XRX) provides document management systems, printing technology, and workplace solutions to businesses of all sizes across the globe.
Xerox reported revenues of $1.58 billion, flat year on year, exceeding analysts’ expectations by 1.6%. Still, it was a softer quarter as it posted a significant miss of analysts’ EPS estimates.
As expected, the stock is down 28.2% since the results and currently trades at $3.75.
Read our full analysis of Xerox’s results here.
IonQ (NYSE: IONQ)
Founded by quantum physics pioneers from the University of Maryland and Duke University in 2015, IonQ (NYSE: IONQ) develops quantum computers that process information using trapped ions to solve complex computational problems beyond the capabilities of traditional computers.
IonQ reported revenues of $20.69 million, up 81.8% year on year. This print beat analysts’ expectations by 21.5%. It was a strong quarter as it also put up full-year revenue guidance exceeding analysts’ expectations.
IonQ scored the biggest analyst estimates beat and fastest revenue growth among its peers. The stock is up 76.3% since reporting and currently trades at $72.66.
Read our full, actionable report on IonQ here, it’s free for active Edge members.
Grid Dynamics (NASDAQ: GDYN)
With engineering centers across the Americas, Europe, and India serving Fortune 1000 companies, Grid Dynamics (NASDAQ: GDYN) provides technology consulting, engineering, and analytics services to help large enterprises modernize their technology systems and business processes.
Grid Dynamics reported revenues of $101.1 million, up 21.7% year on year. This number topped analysts’ expectations by 0.5%. Overall, it was a strong quarter as it also recorded full-year revenue guidance topping analysts’ expectations and EPS in line with analysts’ estimates.
The stock is down 10% since reporting and currently trades at $8.54.
Read our full, actionable report on Grid Dynamics here, it’s free for active Edge members.
Market Update
In response to the Fed’s rate hikes in 2022 and 2023, inflation has been gradually trending down from its post-pandemic peak, trending closer to the Fed’s 2% target. Despite higher borrowing costs, the economy has avoided flashing recessionary signals. This is the much-desired soft landing that many investors hoped for. The recent rate cuts (0.5% in September and 0.25% in November 2024) have bolstered the stock market, making 2024 a strong year for equities. Donald Trump’s presidential win in November sparked additional market gains, sending indices to record highs in the days following his victory. However, debates continue over possible tariffs and corporate tax adjustments, raising questions about economic stability in 2025.
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