Unlocking Value in the IoT Sector: Q2 2025 Earnings and the Hunt for Undervalued Momentum Stocks

The Internet of Things (IoT) sector has long been a battleground for optimism and skepticism. In Q2 2025, the sector delivered a mixed performance, with some companies defying market pessimism through robust earnings and strategic innovation. For investors, the challenge lies in distinguishing between fleeting momentum and durable value creation. This analysis identifies undervalued IoT players that have demonstrated post-earnings strength, despite-or perhaps because of-broader market volatility.

The Winners and Losers of Q2 2025

Samsara (NYSE: IOT) and Palantir Technologies (NASDAQ: PLTR) emerged as standout performers. Samsara reported $391.5 million in revenue, a 30.4% year-over-year increase, and a non-GAAP EPS of $0.12, surpassing estimates by 65.6%, according to a Yahoo Finance analysis. Its stock surged 9.4% post-earnings, reflecting confidence in its AI-driven innovations and enterprise client wins, as highlighted in a StreetInsider article (see below). Palantir, meanwhile, achieved a 48% revenue growth to $1 billion and a 15% stock rally, driven by its AI capabilities and government contracts, per a MarketBeat alert.

However, not all IoT firms fared well. Health Catalyst (NASDAQ: HCAT), Strategy (NASDAQ: MSTR), and Domo (NASDAQ: DOMO) saw their shares decline by 11.1%, 27.7%, and 20.7%, respectively, despite mixed earnings results, as reported in the StreetInsider article. These divergent outcomes highlight the sector's bifurcation between growth-oriented innovators and struggling incumbents.

Valuation Gaps: Where Opportunity Lies

The key to identifying undervalued IoT stocks lies in reconciling earnings surprises with valuation metrics. Samsara, for instance, trades at a negative P/E ratio (-244.92) due to ongoing losses, yet its revenue growth and guidance upgrades suggest a path to profitability, a dynamic also noted in the MarketBeat alert referenced above. Similarly, Palantir's forward P/S ratio of 100x and P/E of over 200x reflect its premium status, but its 48% revenue growth and AI-driven margins justify a portion of this premium, according to its Palantir P/B ratio.

The underperformers, however, present more nuanced opportunities. Health Catalyst, despite an 11.1% stock drop, trades at a HCAT P/B ratio of 0.77 and a TTM P/E of -2.15. Its 6.3% revenue growth, while modest, outperformed its peers in adjusted EBITDA, suggesting operational resilience, according to a Stockstory analysis. Strategy and Domo, on the other hand, face steeper challenges: Strategy's 27.7% decline followed a significant EBITDA miss, while Domo's 20.7% drop reflects concerns about its 1.7% revenue growth, as discussed in the StreetInsider article.

Strategic Considerations for Investors

The IoT sector's post-earnings volatility underscores the importance of balancing growth potential with valuation discipline. Samsara and Palantir exemplify the former, with Samsara's AI investments and Palantir's government contracts offering long-term catalysts. For the underperformers, Health Catalyst's low P/B ratio and EBITDA performance suggest a potential rebound if management can stabilize expectations. Strategy and Domo, however, require more aggressive operational improvements to justify their valuations.

Critically, macroeconomic factors-such as the Fed's rate cuts and political uncertainty-add layers of complexity. As one analyst noted, "The IoT sector is a microcosm of the broader market's tug-of-war between growth and value." Investors must weigh these dynamics against company-specific fundamentals.

Conclusion

Q2 2025 has reaffirmed the IoT sector's dual nature: a blend of high-growth innovation and undervalued resilience. While Samsara and Palantir command premium valuations, their earnings momentum and strategic bets on AI position them as compelling long-term plays. For those willing to navigate risk, Health Catalyst's discounted metrics offer a speculative opportunity, provided its operational turnaround gains traction. The key takeaway? In the IoT sector, as in life, the most rewarding investments often lie where others see only noise.