Software stocks opened under pressure Thursday after quarterly updates from ServiceNow and IBM triggered a wave of selling in the enterprise software group. In premarket trading, ServiceNow dropped 13.1% while a range of peers also moved lower: Salesforce fell 4.5%, Oracle slid 3%, Intuit lost 2.9%, Adobe declined 2.3%, Palo Alto Networks eased 2.1% and Palantir was down 1.6%.
IBM declined 7.1% after the company reported that revenue growth decelerated in the first quarter, with its software business cited as a notable drag on overall performance. The company did not provide further forward-looking commentary in the material cited here.
ServiceNow’s quarterly disclosure included a measured but tangible impact to subscription revenue growth. Management reported a roughly 75 basis point headwind stemming from slippage on an on-premises deal in the Middle East, a shortfall the company quantified at approximately $23 million. Truist analyst Miller Jump characterized the incident as contained in a note published after the results, but warned the market response could be broader for the sector.
"With heightened scrutiny on software vendors as frontier labs ramp enterprise revenue, the penalty for missteps becomes more severe," Jump wrote, and subsequently reduced his price target for ServiceNow from $125 to $120.
Jump also emphasized the centrality of AI competition to ServiceNow’s long-term prospects, adding that despite the near-term issue he continued to see attractive positioning for the company in the enterprise AI buildout. His commentary underscores a tension in the market between short-term execution issues and longer-term strategic positioning around AI capabilities.
Investor concern has been amplified by recent announcements from AI-focused firms. The article notes that Anthropic in February introduced new tools aimed at automating functions like marketing and data analytics. Such introductions have prompted questions among investors about the potential impact that novel AI-related products could have on traditional software business models and recurring revenue streams.
Overall, the market reaction on Thursday reflected heightened sensitivity to execution details at large software vendors and a broader reassessment of how emerging AI products may alter demand for established enterprise software offerings.
Summary of market moves:
- ServiceNow: -13.1%
- IBM: -7.1%
- Salesforce: -4.5%; Oracle: -3%; Intuit: -2.9%; Adobe: -2.3%; Palo Alto Networks: -2.1%; Palantir: -1.6%