Conestoga Capital Advisors, an asset management company, released its third-quarter 2025 investor letter. A copy of the letter can be downloaded here. Equity markets continued their momentum that began in early April, reaching new all-time highs in the third quarter. Conestoga Smid Cap Composite underperformed the Russell 2500 Growth Index in the quarter and returned -1.1% net-of-fees vs +10.7% for the index. The narrow and “low quality” leadership in the stock market rally that began in April grew stronger in the third quarter. Please check the top 5 holdings of the fund for a better understanding of their best picks for 2025.
In its third-quarter 2025 investor letter, Conestoga Capital Advisors highlighted stocks such as Q2 Holdings, Inc. (NYSE:QTWO). Q2 Holdings, Inc. (NYSE:QTWO) is a digital solutions provider to financial institutions, financial technology companies, FinTechs, and alternative finance companies. The one-month return of Q2 Holdings, Inc. (NYSE:QTWO) was -23.43%, and its shares lost 27.27% of their value over the last 52 weeks. On October 17, 2025, Q2 Holdings, Inc. (NYSE:QTWO) stock closed at $59.86 per share, with a market capitalization of $3.738 billion.
Conestoga Capital Advisors stated the following regarding Q2 Holdings, Inc. (NYSE:QTWO) in its third quarter 2025 investor letter:
“Q2 Holdings, Inc. (NYSE:QTWO) provides cloud-based digital banking and lending solutions to financial institutions in the U.S. and abroad. QTWO’s shares were pressured by investors’ concerns about information technology spending by regional banks and credit unions and company specific issues. With respect to the company specific issues, the company discussed a slightly elevated customer churn during 2Q25. The elevated churn was due to an unfavorable mix of M&A and some point solution customers not renewing its contracts. The company said that is still comfortable with sub 5% overall churn for 2025. The company is well positioned to achieve its 13% subscription revenue target for 2025 and continues to see improved profitability and cash flow.”
Q2 Holdings, Inc. (NYSE:QTWO) is not on our list of 30 Most Popular Stocks Among Hedge Funds. According to our database, 29 hedge fund portfolios held Q2 Holdings, Inc. (NYSE:QTWO) at the end of the second quarter, compared to 31 at the end of the previous quarter. While we acknowledge the potential of Q2 Holdings, Inc. (NYSE:QTWO) as an investment, we believe certain AI stocks offer greater upside potential and carry less downside risk. If you’re looking for an extremely undervalued AI stock that also stands to benefit significantly from Trump-era tariffs and the onshoring trend, see our free report on the best short-term AI stock.
