Smartsheet SMAR shares have outperformed the Zacks Computer & Technology sector and its Zacks Internet - Software industry peer Asana ASAN over the past month.

While Smartsheet has moved up 5.4%, Asana, which is a competitor in the project management and collaboration market, has declined 10.3%. The broader sector has dropped 2.2% over the same timeframe.

The uptick can be attributed to Smartsheet’s growing customer base, enhanced product features, and the increasing adoption of AI tools.

In the second quarter of fiscal 2025, Smartsheet saw strong growth in its enterprise segment, with 75 customers increasing its annual recurring revenue (ARR) by more than $100,000 and three transactions exceeding $1 million, including one more than $4 million. The number of customers with ARR of more than $1 million grew 50% year over year, reaching 77.

Smartsheet Price and Consensus

Smartsheet price-consensus-chart | Smartsheet Quote

SMAR ended the quarter with annualized recurring revenue of $1.093 billion and more than 15.3 million Smartsheet users. Its ARR growth was 17% year over year.

However, does the strong portfolio and growing customer base make the SMAR stock attractive? 

Let’s give a peek at its fundamentals.

Will SMAR’s Strong Portfolio Aid Prospect?

Smartsheet’s increasing adoption of AI tools has been noteworthy. In second-quarter 2024, SMAR’s AI tools, including formula generation and tech summaries, saw a 50% sequential growth and helped 47,000 users save an estimated 1 million hours.

Further expanding its portfolio, SMAR also introduced a new Kanban-style board view in the same quarter, providing customers with clear visibility into task status. This will allow customers to see what’s in progress, completed and upcoming quickly.

Smartsheet’s growing clientele, including key partners like Amazon AMZN and Alphabet GOOGL, has been a major growth driver for its success.

In July, Smartsheet implemented Amazon Q Business, a generative AI-powered assistant, to streamline knowledge management and boost employee productivity across its global workforce.

Smartsheet’s collaboration with Alphabet has been noteworthy. The collaboration includes deep integration with Alphabet’s Google Apps for Work, enhancing workplace productivity through features like Gmail and Calendar sync, secure Drive storage and seamless G Suite access.

In second-quarter fiscal 2025, the company also achieved notable expansions and new customer acquisitions, including Intuit, Skechers, City National Bank and a prominent financial services company, highlighting its enterprise readiness and scalability.

SMAR Q3 Guidance Positive

For third-quarter fiscal 2025, SMAR expects revenues in the $282-$285 million range, suggesting year-over-year growth of 15-16%.

The Zacks Consensus Estimate for third-quarter fiscal 2025 revenues is currently pegged at $120.75 million, suggesting 17.64% growth year over year.

The consensus mark for earnings is currently pegged at 30 cents, increasing by a penny in the past 30 days and calling for year-over-year growth of 87.50%.

Zacks Rank & Valuation

Smartsheet’s stock is not so cheap, as the Value Score of D suggests a stretched valuation at this moment.

The forward 12-month Price/Sales ratio for SMAR stands at 7.14X, higher than its Zacks Internet - Software sector’s 3.11X, reflecting a stretched valuation.

Smartsheet currently carries Zacks Rank #3 (Hold), suggesting that it may be wise to wait for a more favorable entry point in the stock.

You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

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