Shares of Salesforce fell nearly 20% on Thursday, the biggest decline since 2004, after the cloud software vendor reported weaker-than-expected revenue and issued disappointing guidance. Salesforce has grown rapidly in the Covid era as companies rushed to buy products for remote work, CEO Marc Benioff said. Customers then had to integrate, and ultimately rationalize, all the new technology.
“Every enterprise software company has adapted” since post-pandemic, Benioff said on his company’s earnings call. The companies that recently reported “are all saying the same thing in different ways.”
Software makers MongoDB, SentinelOne, UiPath and Veeva cut their full-year revenue forecasts this week.
The WisdomTree Cloud Computing Fund, an exchange-traded fund that tracks cloud stocks, fell 5% this week, the biggest decline since January. Paycom, GitLab, Confluent, Snowflake, and ServiceNow lost at least 10% of their value in the downturn.
Dell, which sells personal computers and data center equipment to businesses, raised its full-year forecast on Thursday and said its backlog for AI servers rose to $3.8 billion from $2.9 billion three months ago. But the growing portion of these servers in the product mix, combined with higher input costs, will tighten the company’s gross margin by 150 basis points for the year.
Dell shares fell 13% over the week after hitting new highs. The company is seen as a beneficiary of the generative AI wave as companies ramp up hardware purchases. Barclays analysts wrote in a note on the results that expectations were “high.”
Okta’s stock price is down nearly 9% over the week. Analysts pointed to a weaker than expected backlog of subscriptions. The company said economic conditions are hurting the identity software maker’s ability to sign up new customers and encourage existing customers to expand purchases.
“Macroeconomic headwinds remain,” Okta Chief Financial Officer Brett Tighe said on the company’s earnings call.
One inflation reading this week came in slightly higher than expected. US central bankers are sticking to the stability of the benchmark interest rate, which has reached its highest level in 23 years.
At UiPath, a developer of automation software, business slowed in late March and April, partly due to the economy, co-founder Daniel Deans told analysts on Wednesday. Clients have also become more reluctant to commit to multi-year deals, said Deans, who will replace 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 purchasing habits are changing,” SentinelOne CEO Tomer Weingarten told CNBC on Friday, adding that “how customers evaluate software” is also changing. His company’s stock price fell 22% over the week after guidance beat estimates.
Then there is the impact of artificial intelligence, which is causing companies to realign their priorities.
Peter Gassner, CEO of Veeva, noted “the disruption that has occurred in large organizations as they work through their AI plans.” Veeva, which sells life sciences software, lost nearly 15% of its value this week on concerns about spending in the back half of the year.
Generative AI is a “competitive priority” for Veeva’s customers, Gassner said on the earnings call.
The news wasn’t bad across the board. Zscaler stock jumped 8.5% on Friday after the security software provider beat expectations for the quarter and raised its full-year outlook.
“We expect demand to remain strong as an increasing number of companies plan to adopt our platform to improve internet and data protection,” CEO Jay Chaudhary said on the company’s earnings call.
— CNBC’s Ari Levy contributed to this report.
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