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AI Fears Tank Software Stocks Amidst Earnings Woes
29 Oct
Summary
- Software stocks dropped due to weak results from Fortinet and ServiceNow.
- Fortinet shares fell 26% as revenue growth concerns emerged.
- ServiceNow shares declined 18.5% despite raised annual outlook.
Software company shares experienced a significant decline in premarket trading on Thursday. This downturn followed disappointing financial results from key players, Fortinet and ServiceNow, exacerbating existing worries about the impact of artificial intelligence on traditional business models.
Fortinet's stock plummeted by 26%, marking it as the largest decliner on the S&P 500. Despite raising its annual results expectations, analysts noted a slowdown in its services revenue growth. Consequently, numerous brokerages revised their price targets downwards.
ServiceNow also saw its stock slide by 18.5%. A miss in third-quarter profits overshadowed an improved outlook for full-year subscription revenue and cash flow margins. Analysts pointed to lagging subscription revenue and backlog growth, with AI initiatives yet to significantly materialize.
The negative sentiment extended to other software companies, with Salesforce, Palo Alto Networks, Atlassian, and Zscaler all recording notable losses. This sector-wide impact occurred as Alphabet's Google intensified competition in the AI space with the unveiling of its new frontier AI model.
