Shares of Salesforce fell nearly 20% on Thursday, the biggest drop since 2004, after the cloud software vendor posted lower-than-expected revenue and issued disappointing guidance. CEO Marc Benioff said Salesforce grew rapidly in the COVID era as companies rushed to buy products for remote work. Then customers had to integrate all the new technology, and eventually rationalize.
“Every enterprise software company has adjusted since the pandemic hit,” Benioff said on his company’s earnings call. Businesses reporting recently “are basically all saying the same thing in different ways.”
Software makers MongoDB, SentinelOne, UiPath and Veeva withdrew their full-year revenue forecasts this week.
The WisdomTree Cloud Computing Fund, an exchange-traded fund that tracks cloud stocks, dropped 5% this week, its steepest 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, raised its full-year forecast on Thursday and said its backlog for AI servers grew to $3.8 billion from $2.9 billion three months earlier. But the company’s gross margin will shrink by 150 basis points for the year due to the rising share of these servers in the product mix as well as higher input costs.
Dell shares fell 13% this week after hitting a new peak. The company is being touted as a beneficiary of the generative AI wave as businesses increase their hardware purchases. Barclays analysts wrote in a note on the results that expectations were “inflated.”
Okta’s stock price fell nearly 9% this week. Analysts cited a smaller-than-expected subscription backlog. The company said economic conditions are hurting the identity software maker’s ability to sign up new customers and motivate existing customers to increase purchases.
“Macroeconomic challenges remain,” Okta’s finance chief Brett Tighe said on the company’s earnings report.
An inflation data this week came in slightly higher than expected. US central bankers remain steady on benchmark interest rates, which are at a 23-year high.
At UiPath, a developer of automation software, business momentum declined in late March and April, partly because of the economy, co-founder Daniel Dines told analysts on Wednesday. Clients were more hesitant to commit to multi-year deals, said Dines, who will take over as CEO on June 1, replacing former Google executive Rob Ensslin, just months after the co-CEO stepped down.
Cybersecurity software vendor SentinelOne is seeing a similar trend.
“There’s no doubt 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 it missed guidance estimates.
Then there’s the impact of AI, which is causing businesses to reprioritize.
Veeva CEO Peter Gassner said that “disruption is occurring in large enterprises as they execute on their plans for AI.” Veeva, which sells life sciences software, lost about 15% of its value this week due to concerns about spending in the back half of the year.
Generative AI represents “a competitive priority” for Veeva customers, Gassner said on the earnings call.
The news wasn’t all bad. Shares of security software provider Zscaler jumped 8.5% on Friday after the company reported better-than-expected performance in the quarter and raised its full-year forecast.
“We expect demand to remain strong as a growing number of enterprises plan to adopt our platform for improved cyber and data security,” Jay Chaudhry, the company’s CEO, said on the company’s earnings report.
—CNBC’s Ari Levy contributed to this report.
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