3 High-Growth SaaS Stocks Revolutionizing Software Delivery

The rapid adoption of digital transformation is revolutionizing the software industry, with Software as a Service (SaaS) emerging as a cornerstone of cloud computing. By harnessing transformative technologies like AI, machine learning, and low-code/no-code platforms, SaaS companies are reshaping how businesses operate and innovate.

We present high-growth SaaS stocks ServiceNow, Inc. (NOW), DocuSign, Inc. (DOCU), and Twilio Inc. (TWLO) which are leading this revolution and redefining software delivery.

The SaaS industry's growth is fueled by digital transformation, as businesses seek scalable and flexible cloud solutions to enhance operations. Additionally, the advancements in AI, machine learning, and automation, which enable smarter, tailored offerings, along with the rise of low-code/no-code platforms that make application development accessible to non-technical users are boosting the sector.

Moreover, the shift toward remote work has amplified demand for collaborative, cloud-enabled tools, further accelerating SaaS adoption. As a result, the global SaaS market is projected to grow to $1.23 trillion by 2032, at a CAGR of 18.4%.

Given these promising trends, let's explore SaaS stocks in more detail:

ServiceNow, Inc. (NOW)

NOW offers a wide range of workflow automation solutions through its Now Platform, integrating AI, ML, and RPA for digital transformation. Its products include IT service management, risk management, customer service, and cloud observability, serving industries like government, healthcare, finance, and manufacturing globally.

NOW’s normalized net income has grown at a CAGR of 90.1% over the past three years and its operation income has risen at a CAGR of 73.8% over the same time frame.

On December 3, 2024, NOW and Amazon.com, Inc.’s (AMZN) AWS announced an expanded collaboration to enhance AI-driven business transformation. New integrations, including a connector for Amazon Bedrock models and automation tools for security and procurement, enhance NOW’s platform capabilities, benefiting industries like telecom, finance, and retail.

On November 19, 2024, NOW expanded its partnership with Microsoft Corporation (MSFT), integrating Now Assist with Microsoft 365 Copilot to streamline workflows and enable conversational self-service for tasks like knowledge searches and service requests.

During the fiscal third quarter that ended September 30, 2024, NOW’s non-GAAP total revenues increased 22% year-over-year to $ 2.79 billion. Its non-GAAP income from operations grew 31% from the year-ago value to $ 872 million. In addition, the company’s non-GAAP net income and non-GAAP EPS came in at $ 775 million and $ 3.72.

Analysts expect NOW’s EPS and revenue for the fourth quarter ending December 31, 2024, to increase 17.4% and 21.6% year-over-year to $3.65 and $2.96 billion, respectively. It surpassed the Street EPS and revenue estimates in each of the trailing four quarters, which is promising.

Over the past year, the stock has gained 56.7% to close the last trading session at $1,121.10.

NOW’s POWR Ratings reflect its robust outlook. The stock has an overall rating of B, equating to a Buy in our proprietary rating system. The POWR Ratings are calculated by considering 118 distinct factors, with each factor weighted to an optimal degree.

NOW has a B in Growth, Sentiment, and Quality. It is ranked #14 out of 39 stocks in the B-rated Software - Business industry.

Beyond what we have stated above, we also have given NOW grades for Value, Momentum, and Stability. Get all the NOW’s ratings here.

DocuSign, Inc. (DOCU)

DOCU provides digital solutions like e-signatures, contract management, and industry-specific tools, serving businesses, government agencies, and professionals to streamline and secure agreement processes.

DOCU’s revenue has grown at a CAGR of 14.2% over the past three years and its total assets have risen at a CAGR of 16.1% over the same time frame.

On November 20, 2024, DOCU launched "DocuSign for Developers" empowering developers and businesses to enhance agreement management on its Intelligent Agreement Management platform. This initiative strengthens DOCU's ecosystem and expands its integration and scalability capabilities, boosting its market appeal.

In the fiscal third quarter ended October 31, 2024 DOCU’s total revenue increased 7.8% year-over-year to $754.82 million. Its non-GAAP income from operations was $223.08 million, up 19% from the year-ago value. Moreover, its non-GAAP net income and non-GAAP net income per share stood at $188.50 million and $0.90, up 15.1% and 13.9% over the prior-year quarter, respectively.

Street expects DOCU’s revenue and EPS for the fourth quarter ending January 31, 2025, to increase 6.8% and 11.1% year-over-year to $760.94 million and $0.84, respectively. It surpassed the consensus EPS and revenue estimates in all of the trailing four quarters.

The stock climbed 58.9% year-to-date and has returned 68.3% over the past year, to close the last trading session at $94.48.

DOCU’s POWR Ratings reflect strong prospects. The stock has an overall rating of A, equating to a Strong Buy in our proprietary rating system.

It has an A grade in Quality and a B for Growth and Value. It is ranked #4 out of 18 stocks in the A-rated Software - SAAS industry.

To access DOCU’s Momentum, Stability, and Sentiment ratings, click here.

Twilio Inc. (TWLO)

TWLO provides communication APIs, marketing tools, and platforms like Segment and Engage for personalized customer engagement and omnichannel campaign automation.

TWLO’s revenue has grown at a CAGR of 19.4% over the past three years and its levered Free Cash Flow has risen at a CAGR of 41.2% over the same time frame.

On December 2, 2024, TWLO announced the public beta of Linked Audiences in TWLO Segment for Amazon.com, Inc. (AMZN) Redshift at AWS re:Invent 2024. This integration enhances audience building, customer profile enrichment, and scalable personalization for TWLO Segment and AWS users.

On October 1, 2024, TWLO partnered with OpenAI to integrate the Realtime API, featuring streaming speech-to-speech (S2S) capabilities. This collaboration enables Twilio’s customers and developers to create advanced conversational AI agents using OpenAI’s GPT-4o model.

TWLO’s revenue increased 9.7% year-over-year to $1.13 billion in the fiscal third quarter that ended on September 30, 2024. Its gross profit was $ 578.63 million, up 12.1% from the year-ago value. Its non-GAAP income from operations came in at $ 182.42 million, up 33.7% year-over-year. Its non-GAAP net income and non-GAAP net income per share stood at 53.6% and 75.9% from the year-ago value to $ 163.92 million and $1.02, respectively.

Street expects TWLO’s revenue for the fiscal fourth quarter (ending December 31, 2024) to increase 7.8% year-over-year to $ 1.16 billion. Its EPS for the same quarter is expected to grow 16.6% from the prior year to $1. In addition, it surpassed the consensus EPS and revenue estimates in each of the trailing four quarters.

Shares of TWLO have gained 55.6% over the past year and 48.9% year-to-date to close the last trading session at $112.98.

TWLO’s bright prospects are apparent in its POWR Ratings. The stock has an overall rating of B, which translates to a Buy in our proprietary rating system.

It has an A grade for Growth and a B for Value and Sentiment. Within the A-rated Software - SAAS industry, it is ranked #9 out of 18.

Click here to see TWLO’s ratings for Momentum, Stability, and Quality.

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NOW shares were unchanged in premarket trading Monday. Year-to-date, NOW has gained 58.69%, versus a 28.32% rise in the benchmark S&P 500 index during the same period.

Her interest in risky instruments and passion for writing made Kritika an analyst and financial journalist. She earned her bachelor's degree in commerce and is currently pursuing the CFA program. With her fundamental approach, she aims to help investors identify untapped investment opportunities.

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