Descartes Systems Soars After Crushing Q3 Earnings Estimates
Logistics software provider's stock jumps nearly 13% on strong revenue growth and a bullish outlook, drawing an analyst upgrade.
Shares of Descartes Systems Group (NASDAQ: DSGX) surged nearly 13% in Wednesday trading after the logistics and supply chain software provider delivered third-quarter financial results that significantly outpaced analyst expectations. The robust performance, driven by double-digit revenue growth and expanding margins, signaled strong demand for its cloud-based solutions amid a complex global trade environment.
The Waterloo, Canada-based company reported revenue of $187.7 million for the quarter ending October 31, 2025, an 11% increase from the same period last year and comfortably ahead of the consensus estimate of $184.5 million. The bottom line was even more impressive, with net income rising 20% to $43.9 million. This translated to earnings per share of $0.50, handily beating the anticipated $0.46 per share, according to the company's official earnings release.
Investors reacted with enthusiasm, sending the stock price up by more than 12.9% to close around $93.74. The rally adds to a strong year for the company, pushing its market capitalization to over $7 billion.
The strong results were bolstered by a significant increase in profitability. Descartes reported adjusted EBITDA of $85.5 million, a 19% year-over-year increase, resulting in an adjusted EBITDA margin of 45.6%. In an earnings call with analysts, CEO Edward Ryan pointed to the company's strategic position, highlighting artificial intelligence as a 'huge potential tailwind in demand for our global logistics network.'
The market's bullish reception was reinforced by Wall Street. Analysts at Raymond James upgraded Descartes from 'Market Perform' to 'Outperform' following the report, issuing a new price target of $118.00. The firm's endorsement provided further momentum for the stock, signaling confidence in the company's growth trajectory and execution.
However, the widespread optimism follows a period of more tempered expectations from some analysts. Prior to the earnings release, firms including Scotiabank had trimmed their price targets on Descartes, not due to company-specific issues, but because of broader valuation concerns. Scotiabank lowered its target to $115 from $127, citing 'sector multiple compression' as the primary factor. The post-earnings surge suggests investors are prioritizing Descartes' strong fundamental performance over these wider market anxieties.
Looking ahead, Descartes reiterated its long-term operational targets, which include achieving 10-15% annual growth in adjusted EBITDA while maintaining margins between 40% and 45%. The company's performance is often seen as a barometer for the health of global trade, and its latest results indicate that businesses continue to invest heavily in technology to navigate volatile supply chains and enhance efficiency.
As businesses worldwide continue to digitize their logistics operations, Descartes' comprehensive suite of solutions, from transportation management to customs compliance, appears well-positioned to capture sustained demand. Investors will be watching closely to see if the company can maintain its growth momentum and continue delivering the profitability that sparked Wednesday's remarkable rally.