.webp)
Shares of major SaaS companies fell after weak SAP cloud guidance and a post-earnings drop in ServiceNow heightened AI disruption concerns.
U.S. software shares dropped heavily on Thursday following SAP’s poor cloud forecast and a large post-earnings drop in ServiceNow, reviving fears that legacy SaaS players are being eclipsed by AI-based competitors. The decline affected leading U.S. software stocks and SaaS sector companies listed on major U.S. exchanges.
Shares of Germany’s SAP fell more than 16% after analysts declared that the company’s cloud backlog and 2026 revenue guidance fell short of market forecasts, raising concerns about enterprise cloud software growth. ServiceNow also dropped by 11% despite forecasting annual subscription revenue above market consensus. The weak performance contributed to a broader decline in software-as-a-service stocks, which have seen double-digit losses over the past year amid growing concerns about AI disruption in the software industry.
“The malaise in software sentiment persists, accompanied by a seemingly paradoxical and vicious cycle of depressed valuations and escalating investor expectations,” analysts at J.P. Morgan explained in a research note. “The market is pricing a worst-case scenario that software is dead because AI is disrupting the space,” said Adam Turnquist, chief technical strategist at LPL Financial, highlighting growing concerns over AI impact on SaaS business models.
The sell-off was sector-wide, hitting Salesforce, Adobe, Datadog, Atlassian, Zscaler, Intuit, and HubSpot, all key names in the U.S. enterprise software market. Microsoft also fell after it posted a record level of AI spending, along with cloud growth that was not as strong as expected. Analysts believe that the rapid development of code and apps, enabled by generative AI tools, could hurt the long-term outlook for subscription-based SaaS companies.
However, software companies have increasingly turned to mergers and acquisitions to strengthen their artificial intelligence capabilities, with ServiceNow and Salesforce making high-profile AI-focused acquisitions in recent years. While software stocks declined, semiconductor and memory companies continued to benefit from AI-driven demand, signaling a shift in investor preference within the broader AI technology and cloud computing market.
.webp)
.webp)
