The global software sector is experiencing tremendous growth, underpinned by rapid digital transformation, the widespread adoption of cloud computing, and advancements in artificial intelligence (AI) and automation. As more businesses integrate software solutions to enhance efficiency and drive innovation, the industry’s growth trajectory remains strong. The increasing popularity of subscription-based models and the continuous development of cutting-edge technologies further support this growth. Companies within this sector have managed to defy traditional valuation norms, maintaining high price-to-earnings (P/E) ratios while delivering groundbreaking solutions. Three notable examples include CyberArk Software Ltd. (CYBR), AvePoint, Inc. (AVPT), and Okta, Inc. (OKTA). These companies, by addressing critical needs in identity security, data management, and cloud computing, have positioned themselves as leaders in their respective fields.
The Driving Forces Behind Software Sector Growth
The global software sector’s growth can be attributed to several factors, including digital transformation efforts across various industries and the rise of cloud computing. AI and automation also play pivotal roles by creating more efficient processes and solutions. Emerging trends, such as mobile-first software development and the transition to Software as a Service (SaaS) models, are reshaping how software is consumed and delivered. Mobile applications have become integral to daily life, thanks to the proliferation of smartphones and tablets. SaaS platforms offer businesses scalable and cost-effective solutions that cater to their evolving needs.
According to reports by Precedence Research, the global software market is projected to reach approximately $2.25 trillion by 2034, growing at a compound annual growth rate (CAGR) of 11.8%. This optimistic forecast underscores the conducive environment for continued growth and innovation within the sector. Businesses are increasingly recognizing the value of software in driving their digital transformation initiatives. As they continue to invest in new technologies, the demand for innovative software solutions will only rise. This creates ample opportunities for companies to address various industry needs while expanding their market share and revenue streams.
CyberArk Software Ltd. (CYBR): Leading in Identity Security
CyberArk specializes in identity security solutions, providing products such as Privileged Access Manager, Endpoint Privilege Manager, Secure Desktop, and workforce identity services. These solutions cater to various industries, including financial services, healthcare, retail, and government agencies, ensuring secure access and robust identity management. CYBR’s forward non-GAAP P/E ratio stands at 116.62x, which is 358.4% higher than the industry average of 25.44x, indicating a significant premium. On December 5, CyberArk announced the launch of an underwritten secondary public offering, which includes 1,142,538 ordinary shares.
In the fiscal third quarter ending September 30, 2024, CyberArk’s total revenue increased by 25.6% year-over-year to $240.10 million, with gross profit growing by 29% to $192.92 million. The company reported a non-GAAP net income of $45.14 million, a 130.2% increase from the previous year, and a non-GAAP net income per share of $0.94, up by 123.8%. These robust financials illustrate the company’s ability to deliver significant value to its shareholders. Analysts forecast that CYBR’s earnings per share (EPS) and revenue for the fiscal year ending December 31, 2024, will increase by 163.3% and 31.3%, respectively, to $2.95 and $987.52 million.
The company has consistently surpassed street EPS and revenue estimates in each of the trailing four quarters, showcasing its financial strength and growth potential. Over the past year, CYBR’s stock has gained 58.1%, closing the last trading session at $344.55. The stock surged by 26% over the past six months, reflecting investor confidence in CyberArk’s growth prospects. CYBR’s strong outlook is reflected in its POWR Ratings, which indicate an overall rating of B (Buy). The stock boasts an A grade in Growth and Sentiment, and a B in Momentum and Quality, ranking #9 out of 20 stocks in the A-rated Software – Security industry.
Okta, Inc. (OKTA): Securing Identities Worldwide
Okta provides identity and access management solutions aimed at securing identities for organizations worldwide. Its product suite includes Single Sign-On, Adaptive Multi-Factor Authentication, and API Access Management, enabling secure access across cloud, mobile, and on-premises environments. OKTA’s forward non-GAAP P/E ratio is 30.50x, 19.9% higher than the industry average of 25.44x. In the fiscal 2025 third quarter ending October 31, 2024, Okta’s total revenue increased by 13.9% year-over-year to $665 million.
The company reported a non-GAAP operating income of $138 million, a 62.4% increase, with non-GAAP net income and net income per share standing at $121 million and $0.67, respectively, reflecting increases of 53.2% and 52.3% over the prior-year quarter. Analysts expect Okta’s revenue for the fiscal fourth quarter ending January 31, 2025, to increase by 10.6% year-over-year to $669.10 million, with EPS growth projected at 16.9% to reach $0.74. The company has consistently exceeded consensus EPS and revenue estimates in each of the trailing four quarters, showcasing its financial stability and growth potential.
OKTA’s stock price climbed by 62.2% over the past six months, with a 107.8% return over the past year, closing the last trading session at $76.93. Okta’s bright prospects are reflected in its POWR Ratings, which indicate an overall rating of B (Buy). The stock has an A grade in Growth and a B in Momentum, ranking #10 out of 20 stocks in the A-rated Software – Security industry. As more organizations prioritize secure identity management, Okta’s comprehensive product suite positions it for continued success in the evolving market.
AvePoint, Inc. (AVPT): Innovating in Data Management
AvePoint delivers cloud-native data management and SaaS solutions, addressing data challenges for organizations using platforms like Microsoft, Google, and AWS. The company offers productivity tools, licensing, and support services globally. AVPT’s forward non-GAAP P/E ratio stands at 97.85x, which is 284.7% higher than the industry average of 25.44x. On November 19, AvePoint announced the launch of industry-first Microsoft 365 Copilot benchmarking capabilities within its AVPT tyGraph solution at Microsoft Ignite. This innovation provides organizations with critical insights into AI adoption and usage patterns, enhancing their ability to assess and optimize the effectiveness and sustainability of Microsoft 365 Copilot.
In the fiscal third quarter ending September 30, 2024, AvePoint reported a total revenue increase of 22.1% year-over-year to $88.80 million. The company’s non-GAAP operating income rose by 91.2% to $17.83 million. Additionally, AvePoint achieved a non-GAAP net income of $116.60 million, compared to a loss of $4.21 million in the prior-year quarter, with a non-GAAP net income per share of $0.01, versus a loss of $0.02 previously.
For the fiscal year ending December 31, 2024, AvePoint’s revenue is expected to increase by 21.2% year-over-year to $329.38 million, with EPS growth projected at 113.5% to $0.17. The company has consistently outperformed consensus revenue estimates in each of the trailing four quarters, showcasing its financial resilience and growth potential. Over the past six months, the stock climbed by 62.2%, with a 107.8% return over the past year, closing the last trading session at $16.62.
AvePoint’s strong outlook is reflected in its POWR Ratings, with an overall rating of B (Buy). The stock has a B grade in Growth, Momentum, and Quality, ranking #24 out of 79 stocks in the Technology – Services industry. As data management continues to be a critical need for organizations, AvePoint’s innovative solutions position it well for continued growth.
Main Findings and Conclusion
CyberArk specializes in identity security solutions, offering products like Privileged Access Manager, Endpoint Privilege Manager, Secure Desktop, and workforce identity services. These solutions secure access and manage identities across various industries, including financial services, healthcare, retail, and government. CyberArk’s forward non-GAAP P/E ratio is 116.62x, which is 358.4% higher than the industry average of 25.44x, indicating a significant premium. On December 5, CyberArk announced an underwritten secondary public offering, including 1,142,538 ordinary shares.
In the fiscal third quarter ending September 30, 2024, CyberArk’s revenue grew 25.6% year-over-year to $240.1 million, with a 29% rise in gross profit to $192.92 million. Non-GAAP net income increased by 130.2% to $45.14 million, with a non-GAAP net income per share of $0.94, up 123.8%. These financials show the company’s value delivery to shareholders. Analysts predict CYBR’s fiscal year ending December 31, 2024, will see EPS and revenue growing 163.3% and 31.3% to $2.95 and $987.52 million, respectively.
Over the past year, CYBR’s stock has risen 58.1%, closing its last trading session at $344.55. The stock surged 26% over the past six months, reflecting investor confidence. CYBR’s strong growth is shown in its POWR Ratings, with an overall B (Buy) rating. The stock has an A in Growth and Sentiment, B in Momentum and Quality, and is ranked #9 out of 20 stocks in the A-rated Software – Security industry.
