Software stocks got pummeled this week after a cluster of troubling earnings reports

Salesforce executives informed investors that agreements are declining or being postponed. Dell reported decreasing profit margins. Okta identified macroeconomic challenges. During Veeva’s earnings call, the CEO stated that generative AI is a “competing priority” among customers.

All in all, it was a tough week for software and enterprise technology.

Salesforce shares fell over 20% on Thursday, the highest since 2004, after the cloud software maker reported lower-than-expected revenue and provided poor expectations. Salesforce’s CEO, Marc Benioff, stated that the company expanded rapidly during the Covid pandemic as businesses hurried to purchase remote work solutions. Customers then had to integrate all of the new technologies and eventually rationalize.

“Every enterprise software company has kind of adjusted” since the pandemic, Benioff remarked during his company’s earnings call. Companies that have recently reported are “all basically saying the same thing in different ways.”

This week, software companies like MongoDB, SentinelOne, UiPath, and Veeva reduced their full-year revenue expectations.

The WisdomTree Cloud Computing Fund, an exchange-traded fund that tracks cloud stocks, fell 5% this week, its steepest drop since January. Paycom, GitLab, Confluent, Snowflake, and ServiceNow all lost at least 10% of their value during the downdraft.


Dell, which sells PCs and data center hardware to enterprises, increased its full-year projection and reported a $3.8 billion backlog for AI servers, up from $2.9 billion three months ago. However, the increasing proportion of these servers in the product mix, along with rising input prices, will cause the company’s gross margin to narrow by 150 basis points this year.

Dell shares fell 13% this week after reaching new highs. The company has been considered as a beneficiary of the generative AI wave, as enterprises increase their hardware expenditures. Expectations were “elevated,” according to Barclays analysts in a note on the results.

Okta’s stock price decreased about 9% over the week. Analysts blamed a lower-than-expected subscription backlog. The company stated that economic conditions are limiting the identification software maker’s capacity to sign up new clients and encourage existing ones to expand their purchases.

“Macroeconomic headwinds are still out there,” Okta finance chief Brett Tighe said during the company’s earnings call.

One reading of inflation this week was slightly higher than predicted. US central bankers are keeping steady on the benchmark interest rate, which has reached a 23-year high.

UiPath, an automation software company, saw a drop in business in late March and April, owing in part to the economy, co-founder Daniel Dines told analysts on Wednesday. Customers were also becoming increasingly hesitant to sign multi-year contracts, according to Dines, who will succeed former Google executive Rob Enslin as CEO on June 1, just months after leaving as co-CEO.

SentinelOne, a cybersecurity software firm, is experiencing a similar trend.

“There’s no question that buying habits are changing,” SentinelOne CEO Tomer Weingarten told CNBC on Friday, adding that “how customers are evaluating software” is also changing. His company’s stock price fell 22% this week after projections missed expectations.

Then there’s the impact of artificial intelligence, which is forcing firms to rethink their priorities.

According to Veeva CEO Peter Gassner, “disruption in large enterprises as they work through their plans for AI.” Veeva, which sells life sciences software, lost over 15% of its value this week amid concerns about spending in the second half of the year.

Gassner stated on the results call that generative AI is “a competing priority” for Veeva clients.

Overall, the news wasn’t horrible. Zscaler’s shares rose 8.5% on Friday after exceeding quarterly forecasts and raising its full-year outlook.

“We expect demand to remain strong as an increasing number of enterprises plan to use our platform for better cyber and data protection,” CEO Jay Chaudhry said during the company’s results call.

— Ari Levy of CNBC contributed to this report.