Market reaction
SAP shares fell nearly 2% in premarket trading Thursday as disappointing quarterly showings from fellow software firms ServiceNow and Fortinet intensified investor concerns about disruption from artificial intelligence across the sector. The results from those peers appeared to weigh on sentiment for legacy enterprise software names.
Fortinet and ServiceNow moves
Fortinet recorded a sharp premarket decline of about 27%, making it the top decliner on the benchmark index in early trade. The cybersecurity company upgraded its annual results expectations, but analysts flagged decelerating revenue growth in its services unit - a point of particular concern given the stock has rallied 119% so far this year.
ServiceNow slid more than 18% after reporting a third-quarter profit miss. That negative earnings surprise overshadowed the company’s decision to raise its full-year subscription revenue and cash flow margin outlook, leaving investors focused on the profit shortfall and growth dynamics.
Analyst responses and brokerage actions
Several brokerages responded to the results by trimming price targets on both companies. The cutbacks cited issues including slower revenue growth in Fortinet’s services business and lagging trends in subscription revenue and backlog growth at ServiceNow, along with the observation that AI initiatives have yet to produce tangible upside for those firms.
"Both beat and raise, but Q4 guides seen as very underwhelming," Berenberg analyst Nay Soe Naing said.
Sector context
Software companies have been under heightened scrutiny this year as investors evaluate how newer AI models could alter established business models and revenue streams. The results from Fortinet and ServiceNow intensified those assessments, driving selective selling in related names, and contributing to the broader selloff that pressured SAP shares in premarket trade.
Key takeaways
- SAP shares fell nearly 2% in premarket trading after weak results from software peers.
- Fortinet plunged about 27% premarket despite raising its annual outlook, with analysts pointing to slowing services revenue and noting the stock's 119% rally this year.
- ServiceNow dropped more than 18% following a third-quarter profit miss, even as it raised parts of its full-year subscription and cash flow guidance.