• The 2025 tech rally is about more than just AI—several niches in the broader technology sector are also driving growth. 
• Stock in Doximity, Cloudflare and Semrush are all up more than 40% year-to-date.
• Despite solid prospects, high valuations remain a concern; to maximize returns, investors should monitor earnings reports for favorable entry points.

The stock market rally that began in October 2022 has been propelled largely by the rise of artificial intelligence. But the captivating narrative of AI isn’t the only force driving the broader tech sector’s momentum. Other technology companies are capitalizing on innovation to fuel growth, and opportunities in tech extend well beyond just one trend.

Today, we turn the spotlight on three companies—Cloudflare, Doximity and Semrush—that have delivered impressive year-to-date gains. While these stocks may not be as directly exposed to AI, their strong performance shows the broader potential in the tech sector for 2025 and beyond.

Semrush Holdings

Semrush (SEMR) provides online visibility and marketing software and helps businesses optimize digital marketing with tools for search engine optimization (SEO), content marketing and competitive research. Since its founding in 2008, the company has built a robust platform that supports more than 117,000 paying customers, including industry giants like Alibaba (BABA), Salesforce (CRM) and privately held TikTok. The company is set to capitalize on growing demand for SEO and digital marketing services in an increasingly competitive market. 

In the most recent earnings quarter, Semrush reported its revenue grew 24% year-over-year, totaling $97 million and surpassing analyst estimates. The company also raised its full-year revenue guidance, reflecting an incremental positive. Its enterprise services are gaining traction, with large clients contributing materially to its annual recurring revenue (ARR) of $401 million. But despite this growth, the company faces pressures. Operating margins for the quarter were just 1.8%, down from 3.5% in the same period last year. However, the company’s non-GAAP operating margin showed improvement, reaching 12.4% and signaling cost-efficiency measures are beginning to work.

On the valuation front, Semrush’s stock trades at a high GAAP profits to earnings (P/E) of 233, considerably higher than the sector median of around 33. The price-to-sales ratio, while more reasonable at 7, is still above the sector median of 3.2. Given those elevated multiples, investors may want to consider the possibility that much of the company’s growth already appears to hav beeb priced into he stock. Analyst sentiment on Semrush remains positive, with six out of seven analysts rating the stock a “buy” or “overweight.” But the average price target of $19 per share is nearly in line with the current stock price, indicating the stock may have limited upside from these levels. 

Looking ahead, the Q4 earnings report could help determine the stock’s near-term direction. In Q3, the company raised its guidance for the full year and posted solid growth metrics. But with a high valuation already baked into the price, any signs of decelerating growth could weigh heavily on the stock. On the other hand, if the company can exceed its guidance for Q4, particularly in revenue and margins, it could easily set new 52-week highs. That scenario would also probably prompt a series of analyst upgrades, making the Q4 earnings release a key event to monitor. 

Doximity

Doximity (DOCS), a digital platform designed for healthcare professionals, offers tools to facilitate networking, collaboration and communication. The company was founded in 2010 and serves over 80% of U.S. physicians and 60% of nurses. It provides services such as secure messaging, clinical workflow tools and medical education.

Doximity has positioned itself as a vital platform in healthcare, capitalizing on the industry’s increasing reliance on digital services since the COVID-19 pandemic. And as its customers continue to digitize, Doximity’s growing market share and robust service offerings place it at the intersection of healthcare technology and digital transformation. Year-to-date, the company’s shares are up roughly 40%. 

Last week, Doximity reported impressive Q4 2024 results, surpassing Wall Street expectations with 25% year-over-year revenue growth. Its adjusted earnings per share (EPS) of $0.45 beat estimates by 34%, underscoring the company’s strong performance. The solid guidance for Q1 2025, projecting $133 million in revenue, signals sustained momentum. Additionally, Doximity’s impressive customer retention, with its top 20 customers increasing spend by 22% year-over-year, demonstrates the value and stickiness of its platform.

But despite encouraging financial performance, Doximity’s valuation remains a concern. At its current price of $75 per share, the company’s GAAP TTM price-to-earnings (P/E) ratio is a lofty 83, well above the sector median of around 28. Its price-to-sales ratio of 28 exceeds the sector average of 3.5. While the company’s growth prospects are compelling, analysts are divided on its valuation. Of the 20 analysts covering the stock, 12 maintain a “hold” rating, while 8 are more bullish with “buy” or “overweight” ratings. The average price target of $70 per share indicates some analysts believe the stock’s valuation may have gotten overextended. 

The stock has experienced elevated volatility since the beginning of this month. After an astounding 36% jump following Q4 earnings, the stock pulled back nearly 10% on Feb. 11, settling around $75 per share. These fluctuations suggest that Doximity’s valuation remains a point of contention, with both bulls and bears competing to shape its near-term trajectory. If the shares experience further declines, they could present a compelling buying opportunity for investors looking to capitalize on Doximity’s long-term growth potential at a more attractive valuation.

Cloudflare 

Cloudflare (NET), a leading player in the cloud services niche, provides content delivery network (CDN) services, cybersecurity and performance optimization. The company helps businesses in various industries deliver faster, more-secure internet experiences by managing and enhancing web traffic. Its platform powers AI workloads, with a focus on providing scalable infrastructure for developers and enterprise clients.

As the demand for cloud computing, cybersecurity and AI-driven applications continues to grow, Cloudflare stands at the intersection of multiple high-growth tech sectors. With its global network and innovative services, the company has become a critical infrastructure provider, supporting companies that are modernizing their operations and enhancing security in an increasingly cloud-dependent world.

Shares of Cloudflare have surged 53% this year, propelled by strong earnings and growing opportunities in the AI sector. The company reported Q4 revenue of $460 million, a 27% year-over-year increase that,surpassed analyst expectations. Non-GAAP EPS came in at $0.19, beating estimates by just a cent, while gross margins remained impressive at nearly 78%. Despite this, the company’s Q1 guidance fell short of expectations, and analysts have expressed concern about the stock’s elevated valuation, making it a potential hold at current levels.

Trading at a high P/S ratio of 34 and a staggering P/E ratio of 222, Cloudflare’s stock is priced at a premium compared to its sector. While the company has strong growth potential in its enterprise-focused cloud platform, the steep valuation could limit upside in the near term. Of the 37 analysts covering the company, 18 rate it as a hold, with an average price target of $145 per share, well below the market price of $173 per share. Additionally, Baird downgraded shares to “neutral” on Feb. 3, signaling caution amid the latest surge in the stock price. 

Despite impressive growth and Cloudflare’s strategic positioning in the sector, the stock’s elevated valuation suggests investors may want to wait for a better entry point. While long-term growth prospects remain strong, particularly with the company’s edge network and expanding AI workload capabilities, the stock’s price may need to dip lower before it offers a more attractive risk/reward profile. As illustrated below, shares surged by about 25% in the wake of the earnings report. 

Takeaways

With the 2025 trading year now in full swing, the tech sector is maintaining its impressive momentum, with companies like Semrush, Doximity and Cloudflare carving out their own niches. While not directly tied to the explosive growth of AI, these companies represent the broad spectrum of opportunity in the tech sector. Each leverages innovation to fuel growth.

As these companies march forward, their growth potential remains robust, but investors should remain vigilant, especially watchful of upcoming earnings reports that could prove pivotal in shaping their near-term trajectories. Semrush, in particular, has yet to announce its Q4 earnings, and this report could significantly affect its near-term stock movement, much as observed with Cloudflare and Doximity. With elevated valuations creeping into certain niches of the market, It’s crucial for investors to gauge whether these stocks are truly priced for long-term growth or if a pullback might present a better entry point.

Andrew Prochnow has more than 15 years of experience trading the global financial markets, including 10 years as a professional options trader. Andrew is a frequent contributor Luckbox magazine.

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