Descartes Earnings: Solid Performance as Trends Continue; One-Time Items Are Just Noise

We are raising our fair value estimate to USD 85/CAD 115 from USD 81/CAD 111 for wide-moat Descartes after the firm reported mixed fiscal 2025 second-quarter results relative to our expectations, with better revenue and slightly weaker margins. The company is doing well to expand its business organically and inorganically, completing the acquisition of BoxTop, a software vendor for small logistics providers, for USD 12 million this quarter. Management believes the acquisition environment should remain favorable through the rest of the year. We consistently hear from our coverage that small businesses are hurting, so this tuck-in deal is timely. Management provided third-quarter guidance that, while expectedly conservative, contains positive indicators for US trucking. We believe that the evolution of the supply chain toward greater complexity and increased exogenous shocks benefits Descartes, as proved over the last few years. We raised our near-term revenue estimates to account for quarterly strength and recent acquisitions but still view the shares as slightly overvalued.