The week has been challenging for software and enterprise technology companies, with Salesforce being hit hard by shrinking deals and delayed revenue. The company’s CEO, Marc Benioff, mentioned on the earnings call that the rapid growth experienced during the Covid age has now resulted in customers having to integrate new technology and rationalize their processes. This adjustment has been a common theme among enterprise software companies post-pandemic, leading to a significant drop in Salesforce shares by almost 20% on Thursday, the largest decline since 2004.
Software makers like MongoDB, SentinelOne, UiPath, and Veeva have all revised their full-year revenue forecasts, highlighting the challenges facing the industry. The WisdomTree Cloud Computing Fund, which tracks cloud stocks, experienced a 5% decline, the sharpest drop since January. Additionally, companies like Paycom, GitLab, Confluent, Snowflake, and ServiceNow all saw double-digit losses in value during the week. These downward revisions and declines indicate a broader trend of economic uncertainty impacting the technology sector.
Dell, a company known for selling PCs and data center hardware to businesses, reported an increase in its full-year forecast but also mentioned that its gross margin would narrow by 150 basis points due to a growing portion of AI servers in its product mix and higher input costs. Despite the revenue growth, Dell’s share price slid by 13% for the week, underscoring the challenges faced by even established players in the industry. The company’s exposure to generative AI has raised expectations but also increased pressure on margins.
Okta, a prominent identity software maker, saw its stock price fall by nearly 9% as weaker-than-expected subscription backlog and challenging economic conditions impacted its ability to acquire new customers and expand existing ones. The company’s finance chief, Brett Tighe, acknowledged the presence of macroeconomic headwinds during the earnings call, signaling a broader struggle faced by companies in the software and enterprise tech space.
Companies like UiPath and SentinelOne have observed changes in buying habits, with customers becoming more hesitant to commit to multi-year deals. UiPath’s co-founder, Daniel Dines, mentioned a slump in business in late March and April, partly due to economic factors. SentinelOne CEO Tomer Weingarten also noted a shift in how customers evaluate software, with the company’s stock price dropping by 22% for the week after missing estimates. The impact of generative AI has further complicated decision-making for businesses, leading to a reprioritization of technology investments.
Veeva, a provider of life sciences software, experienced a significant decline in value due to concerns about spending in the latter half of the year. CEO Peter Gassner highlighted disruptions in large enterprises as they navigate AI implementation plans. The competing priority of generative AI for Veeva’s clients has further added to the challenges faced by the company, resulting in a 15% loss in value for the week.
Amidst the overall negative sentiment in the software and enterprise tech sector, Zscaler stood out with an 8.5% stock price jump after beating expectations for the quarter and raising its full-year forecast. CEO Jay Chaudhry attributed the strong performance to increasing adoption of the platform for cybersecurity and data protection by enterprises. The positive outlook from Zscaler provides a glimmer of hope in an otherwise challenging landscape for technology companies.