Perhaps indicative of the fragility of the current rebound – as Software stocks have recently ripped higher for 8 straight days – SaaS stocks are all deeply in the red after-hours as ServiceNow – the potential poster-child for AI disruption – cut its margin outlook amid lackluster results, sending shares reeling.
At first glance, it was a good print – the provider of business task management software posted first-quarter adjusted earnings of 97 cents a share, which was in-line with Wall Street estimates, according to FactSet.
Revenue for the quarter rose 22% to $3.77 billion, marginally above analyst expectations of $3.75 billion.
Additionally, ServiceNow said that subscription revenue will increase about 23% to $3.82 billion in Q2, the company said (marginally above the consensus of $3.75 billion).
But it wasn’t all pretty…
But, it appears Wall Street was hoping for more – with investors already worried about the disruptive impact of AI on software stocks – as NOW shares sank 13% in extended trading…
…after the software company also cut its full-year forecast for subscription adjusted gross margin…
But have no fear, the future looks incredibly rosy!!??
The lukewarm result was blamed on the Mideast conflict:
In Q1 2026, subscription revenues growth saw an approximately 75 basis point headwind from delayed closings of several large on-premise deals in the Middle East, due to the ongoing conflict in the region. This outlook reflects a prudent assessment of those geopolitical headwinds on deal timing for the remainder of FY 2026.
But NOW’s weakness was already impacting the rest of the SaaS space as pre-war worries re-blossomed…
Among other software stocks:
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Salesforce -5.2%,
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Atlassian -6.6%,
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HubSpot -5.5%,
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Workday -4.6%,
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MongoDB -1.9%,
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Snowflake -2.3%,
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Cloudflare -1.2%,
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Microsoft -1.5%
Not pretty…
“We believe it will be difficult for results or management commentary to alleviate concerns around medium-term AI disruption,” wrote Brad Zelnick, an analyst at Deutsche Bank, in a note ahead of earnings.
Even more difficult now…
