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On Wednesday, Citi announced the initiation of a 90-day Upside Catalyst Watch on Confluent , Inc. (NASDAQ:CFLT). The move comes as the firm revises its perspective on the software sector following a March-quarter earnings season that exceeded gloomy expectations. Confluent’s shares have shown recovery, prompting Citi to adjust its outlook. For deeper insights into software sector valuations and comprehensive analysis, InvestingPro offers detailed research reports covering over 1,400 US stocks.
The software market experienced significant volatility after Liberation Day, but according to Citi, the underlying business fundamentals have proven to be more stable than initially anticipated. Feedback from a CIO survey conducted by Citi in early April, which included 103 participants, revealed consistent IT budget allocations. This sentiment was reinforced by recent fieldwork and discussions with management teams, suggesting a steady environment for the sector.
Despite the market reaching recent highs, Citi urges caution against assuming an overall acceleration in sector-wide fundamentals. The firm anticipates that the end of the April quarter could present more challenges compared to March, potentially impacting off-cycle financial reports. However, Citi notes that investors might disregard these risks if the fundamentals continue to improve in May, as indicated by insights from some companies and additional fieldwork.
Citi has updated its rankings, favoring companies that have provided more conservative guidance for the second half of the year and those poised to benefit from upcoming product cycles. Among the firm’s top picks are Microsoft Corp . (NASDAQ:MSFT), Snowflake Inc . (NYSE:SNOW), and MongoDB , Inc. (NASDAQ:MDB). The positive catalyst watch on Confluent reflects Citi’s incremental optimism for the company’s prospects within this context.
In other recent news, Microsoft Corporation has caught the attention of multiple analysts with its advancements in artificial intelligence, following its Build conference. Citi maintained its Buy rating on Microsoft with a price target of $540, emphasizing the company’s leadership in enterprise AI and its potential to exceed Wall Street’s expectations. Raymond (NSE:RYMD) James also reaffirmed an Outperform rating, highlighting Microsoft’s progress in AI integration and its strategic direction. Meanwhile, Goldman Sachs raised its price target for Microsoft to $550, citing the company’s AI initiatives and expected growth in Microsoft Cloud revenue.
Additionally, Proofpoint (NASDAQ:PFPT), Inc. announced plans to acquire Hornetsecurity Group for $1 billion. This acquisition aims to bolster Proofpoint’s security offerings for Microsoft 365, especially targeting small and mid-sized businesses. Hornetsecurity, known for its AI-driven security solutions, reports over $160 million in annual recurring revenue with more than 20% year-over-year growth. The acquisition is set to enhance Proofpoint’s global presence and is expected to close in the second half of 2025.
In related developments, Crusoe, a key supplier for OpenAI’s Texas data center, secured $11.6 billion in funding to expand the facility. This expansion aims to reduce OpenAI’s dependency on Microsoft for computing power, highlighting the dynamic shifts in the tech landscape. The data center will grow from two to eight buildings, enhancing OpenAI’s long-term capabilities and marking a significant development in the AI infrastructure sector.
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