According to Morgan Stanley, the overall performance of the U.S. software sector has deteriorated in the fourth quarter. However, infrastructure software companies like Palantir (PLTR, Financial) and MongoDB (MDB) have bucked the trend, achieving strong revenue growth for the second consecutive quarter.

Analysts led by Keith Weiss at Morgan Stanley reported a decline in revenue, operating margins, and earnings per share across the software industry. The percentage of companies exceeding market expectations by 1% dropped, and the median extent of exceeding expectations turned negative after two quarters of improvement, falling below historical averages. For instance, 64% of companies exceeded revenue expectations by more than 1%, down from 71% in the previous quarter. Regarding earnings per share, 69% surpassed market expectations by $0.02 or more, compared to 71% previously.

In contrast, infrastructure software companies have managed to avoid this downward trend, showing robust revenue performance for the second quarter in a row. SolarWinds (SWI) exceeded market expectations by 7.2%, Palantir by 6.6%, MongoDB by 5.6%, and Elastic (ESTC) by 4.5%. Notably, 80% of infrastructure software companies exceeded revenue expectations by more than 1%, and 85% surpassed earnings per share expectations by more than $0.02.

Weiss highlighted Palantir as the second-best performing stock in the infrastructure software sector, despite high expectations. The company has seen accelerated revenue growth for six consecutive quarters, indicating its potential for sustained growth. Palantir’s stock has risen by 22% this year, while the Nasdaq has declined by over 7% during the same period.