Recently, companies’ reliance on cloud applications and software has increased swiftly to boost their operations and efficiency. This has resulted in significant growth potential for the SAAS industry. This surge is further being encouraged by efforts by companies to lower software costs.

Given the industry’s solid footing, it could be wise to watch fundamentally sound SaaS stocks Twilio Inc. (TWLO), Informatica Inc. (INFA), and DocuSign, Inc. (DOCU).

The business environment around the world is becoming more and more technology-oriented. Companies are increasingly adopting and transitioning to digital technologies to accelerate their operations, optimize their costs, and maintain their competitive edge. This has resulted in a rapid surge for the latest software and SAAS applications, fueling the Software-as-a-service market (SAAS).

IMARC Group expects the global software as a service (SaaS) market to exhibit growth at a noteworthy CAGR of 14.8%, resulting in a market value of $1.17 trillion by 2033. The global market is being favored by factors like growing reliance on SaaS solutions, rising demand from the e-commerce sector, and growing adoption of customer relationship management (CRM) solutions.

Further, the growing preference towards public cloud services in place of on-premises software deployment, coupled with disruptive and innovative technologies like artificial intelligence (AI), machine learning (ML), and automation, are accelerating the transformation to SAAS model and application.

Under such market dynamics, high-growth SAAS stocks appear to be a suitable portfolio addition for taking advantage of emerging opportunities. Considering these promising industry trends, let’s take a look at the fundamentals of the three Software – SAAS stocks, beginning with the third choice.

Stock #3: Twilio Inc. (TWLO)

TWLO provides customer engagement platform solutions internationally. The company operates in two segments, Twilio Communications and Twilio Segment. It offers various application programming interfaces and software solutions for communications between customers and end users.

On December 2, 2024, TWLO expanded its strategic partnership with AWS by launching Linked Audiences in the Twilio Segment for Amazon Redshift, available in public beta. The new integration allows companies’ mutual customers to build audiences, enrich customer profiles, and scalable personalization.

With this, the companies’ customers gain expanded capabilities to drive smarter, more personalized customer interactions and stronger business outcomes.

Also, on October 1, 2024, TWLO collaborated with OpenAI to introduce the company’s new Realtime API to the Twilio platform. The integration of streaming speech-to-speech capabilities, part of the Realtime API, allows more than 300,000 TWLO customers and over 10 million developers to build powerful conversational AI virtual agents.

During the third quarter, which ended September 30, 2024, TWLO’s revenue increased 9.7% year-over-year to $1.13 billion. Its gross profit was $578.63 million, representing an increase of 12.1% year-over-year. The company’s non-GAAP income from operations grew 33.7% from the year-ago value to $182.42 million.

Furthermore, non-GAAP net income attributable to common stockholders stood at $163.92 million or $1.02 per share, up 53.6% and 75.9% from the prior year’s quarter, respectively.

As per the company’s guidance for the fourth quarter of 2024, TWLO expects revenue between $1.15 billion and $1.16 billion, and its non-GAAP income from operations is expected to be $185 million - $195 million. Also, it expects its non-GAAP EPS to be $0.95 to $1.00.

For the full year 2024, the company raised its non-GAAP income from operations guidance to $700 million to $710 million from the prior range of $650 – $675 million.

Analysts expect TWLO’s EPS for the fourth quarter (ended December 2024) to increase 20.1% year-over-year to $1.03, while the company’s revenue is expected to grow 9.9% year-over-year to $1.18 billion for the same quarter. Also, TWLO has topped consensus EPS and revenue estimates in all four trailing quarters, which is impressive.

Shares of TWLO have surged 143.8% over the past six months and 102.9% over the past year to close the last trading session at $144.46.

TWLO’s bright prospects are reflected in its POWR Ratings. The stock has an overall rating of B, which translates to a Buy in our proprietary rating system. The POWR Ratings are calculated by considering 118 different factors, each weighted to an optimal degree.

TWLO has an A grade for Growth and a B for Sentiment. It is ranked #10 out of 18 stocks in the A-rated Software - SAAS industry.

Click here to check other POWR Ratings of TWLO for Momentum, Stability, Quality, and Value.

Stock #2: Informatica Inc. (INFA)

INFA develops an artificial intelligence-powered platform to connect, manage, and unify data across multi-vendor, multi-cloud, and hybrid systems at enterprise scale globally. The company’s platform includes a suite of interoperable data management products, including data integration products to ingest, transform, and integrate data.

INFA’s revenue has grown at a CAGR of 5.4% over the past three years. The company’s EBIT has increased 15.6% over the same timeframe, while its total assets have improved at a CAGR of 2.7%.

On January 30, 2025, INFA announced the certification of its Intelligent Data Management CloudTM (IDMC) platform by the EDM Council after the independent assessment by Projective Group. The platform met the requirements of the 14 key controls of the EDM Council Cloud Data Management Capabilities (CDMC) framework.

The IDMC platform offers efficient migration to the cloud without compromising their data’s security, integrity, and efficiency. It meets the full standards and controls of the CDMC framework, further empowering companies.

On January 14, 2025, INFA announced the latest advances in its continuing partnership with Databricks, the data and AI company. The strategic collaboration will emphasize on areas like deeper integration between INFA’s Intelligent Data Management Cloud (IDMC) platform and the Databricks Data Intelligence Platform.

On January 9, 2025, INFA expanded its partnership with Google Cloud and unveiled Cloud Data Governance and Catalog (CDGC) on Google Cloud, available as a transactable offering on Google Cloud Marketplace.

In the third quarter, which ended September 30, 2024, INFA’s total revenues increased by 3.4% year-over-year to $422.48 million. Its non-GAAP income from operations rose 18% from the prior-year quarter to $151.04 million. The company’s non-GAAP net income came in at $88.95 million and $0.28 per share, indicating growths of 10.3% and 3.7% over the previous-year quarter, respectively.

In addition, the company’s adjusted EBITDA increased 17.1% year-over-year to $154.79 million. Its adjusted free cash flow grew 85.5% from the year-ago value to $107.78 million.

Street expects INFA’s revenue for the fourth quarter (ended December 2024) to increase 2.7% year-over-year to $457.04 million. Its EPS for the same period is expected to increase 17.4% year-over-year to $0.38. Also, the company topped consensus revenue and EPS estimates in three of the trailing four quarters.

INFA’s stock gained 3.4% over the past month and 9.8% over the past six months to close the last trading session at $25.95.

INFA’s sound fundamentals are reflected in its POWR Ratings. The stock has an overall rating of B, which translates to a Buy in our proprietary rating system.

The stock has a B grade for Growth and Quality. Within the A-rated Software - SAAS industry, INFA is ranked #6 among the 18 stocks.

Click here to access additional ratings of INFA for Value, Sentiment, Momentum, and Stability.

Stock #1: DocuSign, Inc. (DOCU)

DOCU provides electronic signature solutions internationally. The company offers e-signature solutions, Contract Lifecycle Management (CLM), Document Generation, and Gen for Salesforce. It also offers Identify, Standards-Based Signatures, Monitor Notary, and Web Forms.

DOCU’s revenue and EBITDA have grown at respective CAGRs of 14.2% and 183% over the past three years. The company’s total assets have increased 16.1% over the same timeframe, while its levered free cash flow has improved at a CAGR of 14.6%.

On February 5, 2025, DOCU launched Notary On-Demand, a new remote online notarization solution that improves security and allows businesses and their clients 24/7 access to a network of notaries with recognition in all 50 U.S. states. The new solution resolves the critical need in high-risk agreement transactions and enhances efficiency.

On November 20, 2024, DOCU introduced Docusign for Developers. It is a powerful suite of tools and resources created especially for developers, partners, and entrepreneurs to revolutionize agreement management. It allows businesses to integrate, extend, and scale solutions on the Docusign Intelligent Agreement Management (IAM) platform.

During the third quarter, which ended October 31, 2024, DOCU’s total revenue grew 7.8% year-over-year to $754.82 million. Its non-GAAP gross profit came in at $622.37 million, indicating a 7% increase over the previous year’s period. Also, the company’s non-GAAP net income was $188.50 million or $0.90 per share, indicating increases of 15.1% and 13.9% year-over-year, respectively.

Analysts expect DOCU’s revenue and EPS for the fourth quarter (ended January 2025) to increase 6.8% and 11.1% year-over-year to $760.94 million and $0.84, respectively. Moreover, the company has surpassed the consensus revenue and EPS estimates in all four trailing quarters, which is promising.

Over the past six months, the stock has gained 74.7% and 76.2% over the past year to close the last trading session at $90.86.

DOCU’s POWR Ratings reflect its robust outlook. The stock has an overall A rating, translating to a Strong Buy in our proprietary rating system.

DOCU has an A grade for Quality. It also has a B grade for Growth and Value. It is ranked #4 among 18 stocks within the same industry.

To see the other ratings of DOCU for Sentiment, Stability, and Momentum, click here.

What To Do Next?

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TWLO shares were trading at $142.34 per share on Tuesday afternoon, down $2.12 (-1.47%). Year-to-date, TWLO has gained 31.70%, versus a 3.02% rise in the benchmark S&P 500 index during the same period.

Rajkumari started her career as a writer but gradually shifted her focus to financial journalism, leveraging her educational background in Commerce. Fascinated by the interplay of business and economic shifts in equities, she aspires to evolve as an analyst. With a knack for simplifying complex financial concepts, her mission is to empower investors with insights that lead to profitable decisions.

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