On 28 July, investors sold semiconductor shares and bought software that had spent the first half of the year going down. Six of the nine companies here rose in that single session — Atlassian by 17.1%, Samsara by 12.5%, Nutanix and BILL by 10.7% each — on a day Salesforce gained about 7%, ServiceNow about 8% and Workday close to 10%. Nobody had reported anything. The rotation came first.

The results came nine days later, and where they landed matters more than the average.

The five that showed their numbers

Dynatrace, which sells software that watches enterprise applications and bills per host and per gigabyte of telemetry, reported on 5 August that annual recurring revenue crossed $2bn, up 17% in constant currency. Net new recurring revenue of $85m was 66% higher than a year earlier. Organic growth in that measure has now accelerated four quarters running, and management raised the full-year outlook.

Atlassian, the Sydney maker of the Jira issue tracker and Confluence wiki, reported on 6 August revenue of $1.77bn, up 28%, with cloud revenue up 31% and remaining performance obligations up 44% to $4.82bn. The profitability turn was the real event: gross margin rose to 86.9% from 83.1%, and operating income under generally accepted accounting principles (GAAP) swung to $211.7m from a $28.5m loss.

Twilio, whose application programming interfaces (APIs) let developers send text messages and place calls, reported the same day. Revenue reached $1.5bn, up 22%. Dollar-based net expansion — what existing customers spend this year against last — hit 116%, against roughly 108% a year ago. Management lifted full-year organic growth guidance to 13–13.5% from 9.5–10.5%. The shares rose 26.6% the following session.

JFrog, which runs Artifactory, the repository where companies store and govern the software packages they build with, grew revenue 29% to $163.8m, with cloud revenue up 53%. Net dollar retention improved three points to 121%. It is still loss-making on a GAAP basis, at -$4.2m, and trades at 100.8x forward earnings.

DigitalOcean, which rents virtual machines and graphics-processing-unit (GPU) capacity to small developers, added a record $93m of incremental recurring revenue and guided full-year revenue to $1.17–1.18bn. Its shares still fell 21.2% on 28 July, the only one of the nine to drop while six peers rallied.

The four that did not

Veeva, Nutanix, Samsara and BILL have not reported since the spring — and two of them were the month's biggest gainers after Atlassian.

Nutanix, a San Jose vendor whose Acropolis platform bundles virtualization, storage and networking for enterprises leaving VMware, rose 22% on no news. Revenue growth has decelerated four consecutive quarters, from 19.2% to 10.0%. The company announced a workforce reduction in early August. What defends it is the profit line: operating income grew 51% on that 10% revenue growth, at an 86.9% gross margin, and the forward price/earnings multiple is 30.4x against 65.3x trailing.

Veeva, which sells clinical, regulatory and customer-management software only to drugmakers, rose 25.9%. The trigger was a contract, not a quarter: Eli Lilly committed to Veeva's Vault CRM globally on 11 August. Revenue grew 16.3% to $882.9m in the April quarter at a 30.9% operating margin, though gross margin slipped to 74.7% from 77.1%. At $243.75 the shares sit at the consensus 12-month target of $244.14, where estimates run from $165 at Goldman Sachs to $350. Results land 26 August.

Samsara, which sells dashcams and telematics to trucking and construction fleets, grew revenue 30.5% to $478.8m and turned GAAP operating income positive at $7.2m. Gross margin eased to 75.4%. It trades at 55.9x forward earnings.

BILL Holdings, which automates bill payment for small businesses, is the cheapest of the nine at 14.8x forward earnings and a 7.7% trailing free-cash-flow yield, and the slowest-growing at 13.5%. It reports on 19 August.

What actually did the work

Every one of the eight names this desk priced on 29 July costs more against its trailing gross profit today, two and a half weeks later. Atlassian went from 4.83x to 7.64x, Veeva from 13.13x to 15.92x, Twilio from 11.42x to 13.37x, Nutanix from 6.67x to 7.52x. Nutanix's has risen 50% since 11 May without a single earnings report in between. Gross profit did not move that fast. The multiple did.

Concentration compounds the point. Atlassian's 76.8% month supplies 42% of the equal-weighted gain and roughly 57% of the market-value-weighted one. Strip it out and the other eight averaged 13.0% — better than the S&P 500's 2.9%, but behind ServiceNow's 18.4% and Salesforce's 17.5% over the identical stretch.

What the month does not support is the idea that this is a round trip. Eight of the nine are up over three months, averaging 35.4%, and all nine now trade above their rising long-term averages, where seven were in downtrends between February and May. Twilio's 50-day average has held above its 200-day since 17 April. DigitalOcean lost that status on 13 July and JFrog on 13 August.

Where the label breaks

The common description of these businesses as infrastructure with a moat hides one hard division: what it costs them to serve a customer. Eight carry gross margins between 74.7% and 86.9%. DigitalOcean's has fallen six straight quarters, from 61.4% to 55.0%, as data-center and GPU capacity converts into depreciation. In the June quarter revenue grew 28.6% to $281.2m, gross profit grew 18.1%, and GAAP operating income fell 17.5% to $29.4m. Committed future revenue rose twelvefold to $894m on the company's first nine-figure contracts. Even after a 41% slide from June's high, it remains the most expensive of the nine at 26.3x trailing gross profit — about 3.5x Nutanix — on an 89.4x forward P/E. That is a de-rating with an arithmetic reason behind it.

The setup

Where it stands — A rotation into beaten-down software lifted all nine; five earned it with results, four have not yet been asked. Would confirm — Veeva's 26 August quarter showing revenue growth at or above the 16.3% it just posted. Would invalidate — Nutanix's next print holding revenue growth near 10% while price-to-gross-profit stays above 7x. Watch next — BILL reports fiscal fourth-quarter results after the close on 19 August. Valuation — Group price-to-gross-profit rose at all eight measured names since 29 July; DigitalOcean 26.3x trailing, 22.6x forward, the dearest.