Small-cap stocks in the Russell 2000 (^RUT) can be a goldmine for investors looking beyond the usual large-cap names.
But with less stability and fewer resources than their bigger counterparts, these companies face steeper challenges in scaling their businesses.
A number of stocks fell in the afternoon session after a hotter-than-expected wholesale inflation report revived concerns about persistent inflation and tempered hopes for a Federal Reserve interest rate cut. The Producer Price Index (PPI) for July jumped 3.3% from a year earlier, surprising economists who had forecasted a 2.5% rate. This data revived concerns about persistent inflation and forced traders to reconsider the likelihood of a near-term interest rate cut by the Federal Reserve. High-growth technology stocks, which dominate the SaaS landscape, are particularly sensitive to interest rate fluctuations.
A number of stocks jumped in the afternoon session after the SaaS sector continued to rally as favorable inflation data bolstered hopes for a Federal Reserve interest rate cut. This optimism was largely driven by a benign July Consumer Price Index (CPI) report, which solidified investor expectations for a Federal Reserve interest rate cut. Following the release of the inflation data, which showed a year-over-year increase of 2.7%, the probability of a rate cut in September surged to over 96%. Lower interest rates are typically beneficial for growth-oriented technology stocks, as they can reduce borrowing costs and increase the present value of future earnings. Adding to the positive sentiment was a 90-day delay in the imposition of higher tariffs on Chinese goods, which reduced trade-related uncertainty for the technology sector.
Fastly’s second quarter was met with a significant positive market reaction, reflecting stronger-than-expected revenue growth and improving operating margins. Management attributed the outperformance to new customer acquisitions, effective competitive takeout strategies, and disciplined pricing. CEO Charles Compton highlighted the impact of Fastly’s expanded security offerings, which now account for a higher share of total revenue, and cited improved network efficiency as another contributor. Fastly also reported progress in diversifying its customer base, with revenue outside its top 10 customers outpacing overall growth.
Content delivery company Fastly (NYSE:FSLY) reported Q2 CY2025 results beating Wall Street’s revenue expectations, with sales up 12.3% year on year to $148.7 million. Guidance for next quarter’s revenue was optimistic at $151 million at the midpoint, 2.5% above analysts’ estimates. Its non-GAAP loss of $0.03 per share was $0.02 above analysts’ consensus estimates.
Content delivery company Fastly (NYSE:FSLY) reported revenue ahead of Wall Street’s expectations in Q2 CY2025, with sales up 12.3% year on year to $148.7 million. Guidance for next quarter’s revenue was optimistic at $151 million at the midpoint, 2.5% above analysts’ estimates. Its non-GAAP loss of $0.03 per share was $0.02 above analysts’ consensus estimates.
Shares of content delivery company Fastly (NYSE:FSLY)
fell 5% in the afternoon session after the White House announced a new round of steep global tariffs, sparking concerns of a trade war and its impact on the U.S. and global economies. This move creates significant uncertainty for businesses and investors. The new tariffs, with rates of up to 41% on imports from 68 countries and the European Union, prompted a broad market sell-off, with the tech-heavy Nasdaq index showing notable weakness. Adding to the bearish sentiment was a weaker-than-expected July jobs report, which revealed that employers created only 73,000 jobs, far below economists' expectations. This combination of trade fears and signs of a slowing labor market has created a "risk-off" environment, leading investors to pull back from growth-oriented sectors like software and technology.
Market swings can be tough to stomach, and volatile stocks often experience exaggerated moves in both directions.
While many thrive during risk-on environments, many also struggle to maintain investor confidence when the ride gets bumpy.
As the Q1 earnings season wraps, let’s dig into this quarter’s best and worst performers in the software development industry, including JFrog (NASDAQ:FROG) and its peers.
As the craze of earnings season draws to a close, here’s a look back at some of the most exciting (and some less so) results from Q1. Today, we are looking at software development stocks, starting with GitLab (NASDAQ:GTLB).
Stocks trading in the $1-10 range are generally smaller players with less risk than their penny stock counterparts.
But that doesn’t mean the underlying businesses are cheap, and we advise caution as many have questionable fundamentals.
Software is rapidly reducing operating expenses for businesses. This secular theme makes SaaS companies attractive investment candidates but also comes with higher valuations that cause volatility.
Unfortunately, the rich prices have haunted them over the past six months as the industry has shed 3.1%. This performance was discouraging since the S&P 500 returned 4.5%.
As the craze of earnings season draws to a close, here’s a look back at some of the most exciting (and some less so) results from Q1. Today, we are looking at software development stocks, starting with Bandwidth (NASDAQ:BAND).
Fastly’s first quarter was marked by positive momentum, driven by gains with enterprise customers and notable progress in product diversification. Management credited strong new customer acquisition in strategic verticals such as travel, financial services, and retail, as well as cross-sell momentum in its security and compute portfolio. CEO Todd Nightingale highlighted the impact of Fastly’s revamped go-to-market strategy and increased packaging simplicity, with over half of customers now using more than one product line. Nightingale explained, “Our platform strategy continues to yield results as now almost half of our customers leverage two or more Fastly product lines, generating three quarters of our revenue.”
Looking back on software development stocks’ Q1 earnings, we examine this quarter’s best and worst performers, including Dynatrace (NYSE:DT) and its peers.
The Russell 2000 (^RUT) is packed with potential breakout stocks, thanks to its focus on smaller companies with high growth potential.
However, smaller size also means these businesses often lack the resilience and financial flexibility of large-cap firms, making careful selection crucial.
