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

Published

2 years ago

June 1, 2024

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Salesforce executives told investors that deals are shrinking or getting delayed. Dell said its margin is getting smaller. Okta highlighted macroeconomic challenges. And Veeva’s CEO said on his company’s earnings call that generative artificial intelligence has been “a competing priority” for customers.

Add it all up and it was a brutal week for software and enterprise tech.

Salesforce shares plunged almost 20% on Thursday, the biggest drop since 2004, after the cloud software vendor posted weaker-than-expected revenue and issued disappointing guidance. CEO Marc Benioff said Salesforce grew quickly in the Covid age as companies rushed to buy products for remote work. Then customers had to integrate all the new technology, and to eventually rationalize.

“Every enterprise software company kind of has adjusted” since after the pandemic, Benioff said on his company’s earnings call. Businesses that have reported lately are “all basically saying that same thing in different ways.”

Software makers MongoDB, SentinelOne, UiPath and Veeva all pulled down their full-year revenue forecasts this week.

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

Dell, which sells PCs and data center hardware to businesses, bumped up its full-year forecast on Thursday and said its backlog for AI servers had grown to $3.8 billion from $2.9 billion three months ago. But the growing portion of these servers in the product mix, along with higher input costs, will cause the company’s gross margin to narrow by 150 basis points for the year.

Dell shares slid 13% for the week after hitting fresh highs. The company has been viewed as a beneficiary of the generative AI wave as businesses step up their hardware purchases. Expectations were “elevated,” Barclays analysts wrote in a note on the results.

Okta’s stock price fell almost 9% for the week. Analysts cited weaker-than-expected subscription backlog. The company said economic conditions are hurting the identity software maker’s ability to sign up new customers and get existing ones to expand purchases.

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

One reading of inflation this week came in slightly higher than expected. U.S central bankers are holding steady on the benchmark interest rate, which has been at a 23-year high.

At UiPath, a developer of automation software, the pace of business slumped in late March and in April, in part because of the economy, co-founder Daniel Dines told analysts on Wednesday. Customers were also becoming more hesitant to commit to multi-year deals, said Dines, who is replacing former Google executive Rob Enslin as CEO on June 1, just months after stepping down as co-CEO.

Cybersecurity software vendor SentinelOne is seeing 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 plunged 22% for the week after guidance missed estimates.

Then there’s the impact of AI, which is causing businesses to reprioritize.

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

Gassner said on the earnings call that generative AI represents “a competing priority” for Veeva clients.

The news wasn’t bad across the board. Zscaler‘s stock jumped 8.5% on Friday after the security software provider beat expectations for the quarter and raised its full-year forecast.

“We expect demand to remain strong as an increasing number of enterprises are planning to adopt our platform for better cyber and data protection,” CEO Jay Chaudhry said on the company’s earnings call.

—CNBC’s Ari Levy contributed to this report.

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Technology

Okta shares fall as company declines to give guidance for next fiscal year

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1 hour ago

December 2, 2025

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Okta shares fall as company declines to give guidance for next fiscal year

Cheng Xin | Getty Images

Okta on Tuesday topped Wall Street’s third-quarter estimates and issued an upbeat outlook, but shares fell as the company did not provide guidance for fiscal 2027.

Shares of the identity management provider fell more than 3% in after-hours trading on Tuesday.

Here’s how the company did versus LSEG estimates:

Earnings per share: 82 cents adjusted vs. 76 cents expected
Revenue: $742 million vs. $730 million expected

Compared to previous third-quarter reports, Okta refrained from offering preliminary guidance for the upcoming fiscal year. Finance chief Brett Tighe cited seasonality in the fourth quarter, and said providing guidance would require “some conservatism.”

Okta released a capability that allows businesses to build AI agents and automate tasks during the third quarter.

CEO Todd McKinnon told CNBC that upside from AI agents haven’t been fully baked into results and could exceed Okta’s core total addressable market over the next five years.

“It’s not in the results yet, but we’re investing, and we’re capitalizing on the opportunity like it will be a big part of the future,” he said in a Tuesday interview.

Revenues increased almost 12% from $665 million in the year-ago period. Net income increased 169% to $43 million, or 24 cents per share, from $16 million, or breakeven, a year ago. Subscription revenues grew 11% to $724 million, ahead of a $715 million estimate.

For the current quarter, the cybersecurity company expects revenues between $748 million and $750 million and adjusted earnings of 84 cents to 85 cents per share. Analysts forecast $738 million in revenues and EPS of 84 cents for the fourth quarter.

Returning performance obligations, or the company’s subscription backlog, rose 17% from a year ago to $4.29 billion and surpassed a $4.17 billion estimate from StreetAccount.

This year has been a blockbuster period for cybersecurity companies, with major acquisition deals from the likes of Palo Alto Networks and Google and a raft of new initial public offerings from the sector.

Okta shares have gained about 4% this year.

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Technology

Marvell to acquire Celestial AI for as much as $5.5 billion

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2 hours ago

December 2, 2025

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Marvell to acquire Celestial AI for as much as .5 billion

Marvell Technology Group Ltd. headquarters in Santa Clara, California, on Sept. 6, 2024.

David Paul Morris | Bloomberg | Getty Images

Semiconductor company Marvell on Tuesday announced that it will acquire Celestial AI for at least $3.25 billion in cash and stock.

The purchase price could increase to $5.5 billion if Celestial hits revenue milestones, Marvell said.

Marvell shares rose 13% in extended trading Tuesday as the company reported third-quarter earnings that beat expectations and said on the earnings call that it expected data center revenue to rise 25% next year.

The deal is an aggressive move for Marvell to acquire complimentary technology to its semiconductor networking business. The addition of Celestial could enable Marvell to sell more chips and parts to companies that are currently committing to spend hundreds of billions of dollars on infrastructure for AI.

Marvell stock is down 18% so far in 2025 even as semiconductor rivals like Broadcom have seen big valuation increases driven by excitement around artificial intelligence.

Celestial is a startup focused on developing optical interconnect hardware, which it calls a “photonic fabric,” to connect high-performance computers. Celestial was reportedly valued at $2.5 billion in March in a funding round, and Intel CEO Lip-Bu Tan joined the startup’s board in January.

Optical connections are becoming increasingly important because the most advanced AI systems need those parts tie together dozens or hundreds of chips so they can work as one to train and run the biggest large-language models.

Currently, many AI chip connections are done using copper wires, but newer systems are increasingly using optical connections because they can transfer more data faster and enable physically longer cables. Optical connections also cost more.

“This builds on our technology leadership, broadens our addressable market in scale-up connectivity, and accelerates our roadmap to deliver the industry’s most complete connectivity platform for AI and cloud customers,” Marvell CEO Matt Murphy said in a statement.

Marvell said that the first application of Celestial technology would be to connect a system based on “large XPUs,” which are custom AI chips usually made by the companies investing billions in AI infrastructure.

On Tuesday, the company said that it could even integrate Celestial’s optical technology into custom chips, and based on customer traction, the startup’s technology would soon be integrated into custom AI chips and related parts called switches.

Amazon Web Services Vice President Dave Brown said in a statement that Marvell’s acquisition of Celestial will “help further accelerate optical scale-up innovation for next-generation AI deployments.”

The maximum payout for the deal will be triggered if Celestial can record $2 billion in cumulative revenue by the end of fiscal 2029. The deal is expected to close early next year.

In its third-quarter earnings on Tuesday, Marvell earnings of 76 cents per share on $2.08 billion in sales, versus LSEG expectations of 73 cents on $2.07 billion in sales. Marvell said that it expects fourth-quarter revenue to be $2.2 billion, slightly higher than LSEG’s forecast of $2.18 billion.

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