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.

WATCH: Earnings are good, but software has to execute better, says FBB Capital’s Mike Bailey

Technology

Anthropic reportedly preparing for one of the largest IPOs ever in race with OpenAI: FT

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4 hours ago

December 3, 2025

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Anthropic reportedly preparing for one of the largest IPOs ever in race with OpenAI: FT

Nurphoto | Getty Images

Anthropic, the AI startup behind the popular Claude chatbot, is in early talks to launch one of the largest initial public offerings as early as next year, the Financial Times reported Wednesday.

For the potential IPO, Anthropic has engaged law firm Wilson Sonsini Goodrich & Rosati, which has previously worked on high-profile tech IPOs such as Google, LinkedIn and Lyft, the FT said, citing two sources familiar with the matter.

The start-up, led by chief executive Dario Amodei, was also pursuing a private funding round that could value it above $300 billion, including a $15 billion combined commitment from Microsoft and Nvidia, per the report.

It added that Anthropic has also discussed a potential IPO with major investment banks, but that sources characterized the discussions as preliminary and informal.

If true, the news could position Anthropic in a race to market with rival ChatGPT-maker OpenAI, which is also reportedly laying the groundwork for a public offering. The potential listings would also test investors’ appetite for loss-making AI startups amid growing fears of a so-called AI bubble.

However, an Anthropic spokesperson told the FT: “It’s fairly standard practice for companies operating at our scale and revenue level to effectively operate as if they are publicly traded companies,” adding that no decisions have been made on timing or whether to go public.

CNBC was unable to reach Anthropic and Wilson Sonsini, which has advised Anthropic for a few years, for comment.

According to one of the FT’s sources, Anthropic has been working through internal preparations for a potential listing, though details were not provided.

The FT report follows several notable changes at the company of late, including the hiring of former Airbnb executive Krishna Rao, who played a key role in the firm’s 2020 IPO.

CNBC also reported last month that Anthropic was recently valued to the range of $350 billion after receiving investments of up to $5 billion from Microsoft and $10 billion from Nvidia.

In its race to overtake OpenAI in the AI space, the startup has also been expanding aggressively, recently announcing a $50 billion AI infrastructure build-out with data centers in Texas and New York, and tripling its international workforce.

According to the FT report, investors in the company are enthusiastic about Anthropic’s potential IPO, which could see it “seize the initiative” from OpenAI.

While OpenAI has been rumoured to be considering an IPO, its chief financial officer recently said the company is not pursuing a near-term listing, even as it closed a $6.6 billion share sale at a $500 billion valuation in October.

Technology

We’re raising our CrowdStrike price target following a beat and raise quarter

Published

6 hours ago

December 3, 2025

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We're raising our CrowdStrike price target following a beat and raise quarter

Technology

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

Published

9 hours 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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