Software stocks got pummeled this week after a cluster of troubling earnings reports

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