The uncertain macroeconomic environment weighed heavily on the stock market. With inflation and interest rates on the rise, many investors sold perceived risky assets to hedge against the possibility of a recession.

The technology sector has been particularly hard hit. The S&P 500 Information Technology The index is currently at 21% of its all-time high.

Why? Tech stocks are typically valued based on cash flow, and investors worry that an economic downturn could stunt growth, making already rich valuations even more expensive. But the latest income comes from Z-scale (ZS 7.99%) and Selling power (RCMP 7.00%) suggest that the logic does not apply to all technology companies.

Zscaler: the largest network security cloud

Zscaler operates the largest security cloud in the world. Its platform acts as an intelligent gateway that accelerates and protects networks and applications, securely connecting employees to corporate resources, regardless of device or location. Additionally, by delivering security from the cloud, Zscaler eliminates the need for expensive on-premises security appliances.

The company benefits from a powerful network effect built on its formidable scale. Zscaler’s infrastructure spans 150 data centers and handles 240 billion daily queries. This means that it encounters millions of threats every day, and each improves its artificial intelligence (AI) engine a little to block attacks. To put Zscaler’s reputation into perspective, the research firm Gartner recognized the company as an industry leader for 11 consecutive years.

Thanks to its strong position in a critical industry, Zscaler fired again at full steam in the third quarter of fiscal 2022 (ended April 30, 2022). The company beat Wall Street expectations for revenue and profit, as revenue jumped 63% to $287 million and non-GAAP earnings rose 13% to $0.17 per month. diluted stock. Even better, the remaining performance obligation soared 83% to $2.2 billion, implying strong future revenue growth. Management also raised its forecast for the full year.

Looking ahead, investors have good reason to believe that Zscaler can maintain this momentum. The company estimates its market opportunity at $72 billion, and trends such as cloud computing, remote working and the ever-increasing number of connected devices should be tailwinds for its business. Additionally, Zscaler has now demonstrated that it can thrive in difficult macroeconomic conditions.

Salesforce: the benchmark for CRM software

Salesforce specializes in customer relationship management (CRM) software. Its platform is designed to boost productivity in sales, customer service, marketing, and commerce. It also includes tools for analysis, application development and data integration. These resources help organizations engage customers and retain them throughout the customer lifecycle.

With its pioneering status and broad portfolio, Salesforce dominates the CRM industry. The company has nearly 24% market share, more than the next four competitors combined, according to International Data Corp. This strong market position continued to pay off in the first quarter, as Salesforce beat Wall Street expectations up and down. lines.

Revenue climbed 24% to $7.4 billion. While non-GAAP earnings fell 19% to $0.98 per diluted share, that figure still tops the consensus estimate of $0.94 per diluted share.

Salesforce also generated $3.7 billion in cash from operations, up 14%, and improved its full-year earnings guidance. Better still, founder and CEO Mark Benioff noted that demand remains strong and the company “sees no material impact” from the current macro environment.

Investors should be delighted with this news. Salesforce has demonstrated its durability through several past downturns, including the dot-com crash of the early 2000s, and the company is well positioned to weather the current market turmoil. With that in mind, management estimates its addressable market to be $248 billion by 2025, so Salesforce has ample room to grow its business.

A reason to be optimistic

Cybersecurity and CRM software play a vital role in the modern IT ecosystem. For this reason, even if we are on the verge of a recession, organizations will need platforms like Zscaler and Salesforce. This means that both companies should continue to grow through the current downturn, and their latest quarterly results are a bullish data point supporting this theory.

That doesn’t mean the two stocks will skyrocket right away. Many factors affect investor sentiment, making it virtually impossible to predict short-term price action. But Zscaler and Salesforce enjoy leadership positions in their respective industries, and both companies appear to be in good shape. This should help stocks bounce back quickly when the market finally recovers.

More broadly, tech investors can breathe a sigh of relief. While the industry has been hit particularly hard, Zscaler and Salesforce prove that high-quality companies are able to operate even in a turbulent macro environment.