Q3 2024 software earnings

As Q3 ends, let’s review how software companies have performed, based on Clouded Judgement’s data from 29 companies:

* Every company exceeded Q3 consensus estimates, with a median beat of 2.4%. Over the past two years, around 90% have typically outperformed by a median of 1.5-2%, making this Q3 the strongest quarter since late 2022

* For Q4 guidance, 71% of companies surpassed expectations with a median beat of 0.3%. In the past two years, approximately 50% of companies have exceeded guidance, often with no median beat. This quarter’s guidance marks the highest performance since Q1 2022

* Examining net new ARR added this quarter, these companies have reported their second-highest net new ARR addition since early 2020

Now, how could it not be, let’s turn to the tech Juggernauts in AI (statistics not included above), comments from the earnings calls:

* Microsoft: “We’re excited that only 2.5 years in, our AI business is on track to surpass $10B of annual revenue run rate in Q2. This will be the fastest business in our history to reach this milestone”. “Azure OpenAI usage more than doubled over the past 6 months”

* Google: “Gemini API calls have grown nearly 14x in a 6-month period”. “Today, more than 1/4 of all new code at Google is generated by AI, then reviewed and accepted by engineers”. “Since we first began testing AI overviews, we have lowered machine cost per query significantly. In 18 months, we reduced cost by more than 90% for these queries”

* Meta: “Meta AI now has more than 500 million monthly actives”. “Improvements to our AI-driven feed and video recommendations have led to an 8% increase in time spent on Facebook and a 6% increase on Instagram this year alone”. “We’re training the Llama 4 models on a cluster that is bigger than 100K H100s”. “More than 1M advertisers used our Gen AI tools to create more than 15M ads in the last month. And we estimate that businesses using image generation are seeing a 7% increase in conversions”

* AWS: “AWS’s AI business is a multibillion-dollar revenue run rate business that continues to grow at a triple-digit year-over-year percentage and is growing more than 3x faster at this stage of its evolution as AWS itself grew”

* In terms of Capex, the four collectively spent $59.3B in the quarter, with expectations of significant growth in Capex next year

Conclusion

It seems that the software business environment is improving.

Knock on wood.