The troubling initial share sales from Square and Box last year contributed to a freezing of the tech IPO market. Those companies may now be helping it thaw.
There hasn't been a tech IPO from a U.S.-based company since Square and Match.com debuted in November. Atlassian, headquartered in Australia, went public in December. Since then, Elevate Credit postponed its offering and Nutanix shelved its road show as tech stocks plunged to start the year.
But after the market closed Wednesday, Square and Box delivered earnings reports that uplifted shareholders, with both showing they have the potential to actually make money.
Box, a provider of cloud-based storage and collaboration software for businesses, said revenue in the fourth quarter jumped 36 percent to $85 million, topping the average analyst estimate of $82 million, according to Thomson Reuters.
More importantly, Box is proving it can grow at that clip while also reeling in costs. Sales and marketing as a percentage of revenue fell to 74 percent from 88 percent a year earlier. The company's adjusted loss of 26 cents a share beat analyst expectations by 3 cents, and Chief Financial Officer Dylan Smith said the business is on pace to be cash-flow positive within a year.
Box shares surged as much as 17 percent in extended to trading to $14.08, more than wiping their loss for the year and lifting the stock above its $14 IPO price from early 2015. Before Thursday's session, it was up 13.42 percent at $14.20 in premarket trading.
"We had a correction and the market recalibrated around earnings," said Charley Moore, CEO of Rocket Lawyer, a San Francisco-based developer of online legal documents and support. "The market will be looking at a real path to profitability."
Square, in its first earnings report since going public, reported a 49 percent increase in fourth-quarter net revenue to $379 million, beating analyst expectations for sales of $343 million.
The payments company led by Twitter co-founder and CEO Jack Dorsey projected adjusted 2016 earnings of $6 million to $12 million. The stock jumped as much as 7 percent immediately after the earnings report to a high of $12.87, but then pared its gains. In Thursday's premarket, it was up 1.25 percent.
Reports from Box and Square come after a three-week rally in tech stocks, spurred in part by better-than-expected quarterly numbers from Salesforce.com and Splunk. That's a dramatic turn since January, which marked the worst month for the Nasdaq since 2010.
A few more weeks of this and investors might start to see some of those richly valued venture-backed companies filing their prospectuses.
Correction -- An earlier version of this story said there hadn't been a tech IPO in the U.S. since November.