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ServiceNow’s woes are dragging the entire software sector down

It’s software spooky season... and misery loves company.

Investors have not had a lot of time for software stocks in 2026. Every few weeks, an Anthropic-shaped grenade is lobbed towards the likes of Workday, Salesforce, Atlassian, ServiceNow, Adobe, or Figma.

Whether you make dashboards, CRMs, design tools, or run an HR platform, if it's built on code, the market thinks there's a decent chance that at least one of the four C's — Claude, Codex, Copilot, or Cursor — is going to blow a hole in your business model. Or, to be more accurate: someone using one of those coding tools will.

There was a brief reprieve when the world was hurtling towards energy disaster, with investors suddenly seeing their non-energy exposed cash flows as useful once again. However, with the geopolitical situation seemingly no longer a major threat — at least from a markets perspective, that is, as the S&P broaches new highs on an almost-daily basis — the focus is back on software.

So, it was a big test for the space then when ServiceNow stepped up to the plate yesterday, with its Q1 numbers set to be heavily scrutinized for any signs of AI-related weakness.

In a normal quarter, revenue that came in $20 million ahead and adjusted EPS that came in on the number might be broadly shrugged off, but ServiceNow is being aggressively dumped in the premarket, down 13% at the time of writing. And misery loves company in the 2026 software world, which is why peers like Workday, Atlassian, Hubspot, Salesforce, and Intuit are among the worst performers in the early action on Thursday.

Given the price action of the last few months, that’s hardly surprising. Increasingly, the fate of many of these high-profile software names on any given day is mostly tied to what the IGV software ETF is doing. The average correlation between NOW, TEAM, WDAY, CRM, ADBE, FIG, and IGV is now north of 0.8.

So, what exactly was ServiceNow's great transgression? The main culprit was a miss on margins, with the company reporting adjusted gross profit margins of 79.5%, about 1 percentage point light vs. what Wall Street was expecting. The company also said it was cutting its full-year subscription adjusted gross margin; previously, the company expected 82%, now it sees just 81.5% (25 bps of which was attributed to an acquisition). That half a point cut was seemingly all the market needed to re-evaluate things on a more structural basis, with investors ignoring the fact that the company now expects $1.5 billion in AI software sales in 2026, up from $1 billion previously.

Claire Yubin Oh17m

Texas Instruments soars after beating on Q1 revenue, with strong guidance to match

Texas Instruments surged more than 10% in premarket trading on Thursday after the chipmaker reported better-than-expected Q1 results and a surprisingly strong second-quarter forecast, driven by growing demand for its analog chips.

Per its press release, the company reported the following results for the fiscal first quarter:

Revenue of $4.83 billion, handily beating analyst estimates of $4.52 billion (compiled by Bloomberg).
Adjusted EPS of $1.68, up 31% year-over-year and topping Wall Street estimates for $1.37.

Texas Instruments specializes in making analog chips, which regulate power systems and convert signals like sound or light into digital data that semiconductors can process. Though far from the sexy chips that do AI compute work, like the heavily in-demand kind that Nvidia and others design, TI’s products still seem to be getting a lift from all this spending.

Noting a “continued acceleration in industrial and data center” verticals, the company's top line seemed to get a big boost, with demand from industrial end markets up 30% and data center demand growing 90% year-on-year, too. CEO Haviv Ilan commented in the earnings call that, “we remain well-positioned with inventory and capacity that allows us to support our customers with competitive lead times through the cycle.”

While the company’s revenue is still short of its 2022 peak, Ilan also added that “there is a lot of room to grow,” and is optimistic that the run-up can continue. Indeed, for the coming second quarter, Texas Instruments expects revenue in the range of $5 billion to $5.4 billion, well ahead of current analyst expectations for $4.8 billion.

Claire Yubin Oh31m

Netflix announces $25 billion share buyback boost

Netflix is ticking up in premarket trading on Thursday after the streaming giant announced plans to buy back an additional $25 billion worth of shares, roughly 6% of the company's market cap as of yesterday's closing price.

Per the company's regulatory filing reported on Wednesday evening, Netflix's board authorized the repurchase program in addition to the buyback plan announced in December 2024 that still had ~$6.8 billion available for purchase.

Netflix is down more than 13% since the close of trading on April 16th, the day before the company reported disappointing first-quarter results, alongside announcing that co-founder Reed Hastings will be stepping down as its chairman in June. The plan likely comes as a small surprise for Wall Street, as Netflix announced in its latest earnings call that it will make no changes to its capital allocation program despite expectations that the company may use the increased financial headroom from the now-axed Warner Bros. deal to do so.

Max Knoblauch52m

American Airlines cuts its full-year earnings forecast, reports better than expected Q1 revenue

The final of the big four US airlines to drop its Q1 earnings, American Airlines, did just that on Thursday morning before markets opened. The carrier’s shares ticked down in premarket trading.

For Q1 2026, American reported:

An adjusted loss of $0.40 per share, compared to the loss of $0.47 per share expected from Wall Street analysts polled by FactSet.
$13.91 billion in revenue, compared to estimates of $13.79 billion.

Looking ahead to Q2, the company expects adjusted earnings per share of between -$0.20 and $0.20, compared to the $0.08 loss expected by Wall Street. For the full year ahead, American forecast adjusted earnings of between a $0.40 loss per share and earnings of $1.10 per share, lower than its earlier forecast of $1.70 to $2.70 per share. Analysts expected a loss of $0.65.

American said it paid $2.93 billion for fuel and related taxes in the quarter, up 13.2% from the same period last year.

Like the rest of its major rivals, American airlines hiked its bag fees earlier this month in an attempt to offset fuel costs that’ve spiked amid the war in Iran. In March, American boosted its sales outlook on stronger than expected demand.

Lately, the airline has spent time and effort rejecting rumors that it could potentially merge with rival United Airlines. Recent reports that United CEO Scott Kirby had floated the idea to President Trump sent American’s shares climbing, but they’ve since pared most of those gains. On Tuesday, the president said he doesn’t like the idea of the merger.

Max Knoblauch16h

Southwest reports lower-than-expected Q1 earnings and revenue, declines to offer full-year profit update

Southwest Airlines reported its first-quarter earnings after the bell on Wednesday. Its shares fell more than 6% in after-hours trading.

For the first quarter, Southwest reported:

Adjusted earnings of $0.45 per share, compared to the $0.47 per share expected by Wall Street analysts polled by Factset.
Revenue of $7.25 billion, compared to estimates of $7.27 billion.

The carrier guided for adjusted earnings of between $0.35 and $0.65 per share for its second quarter, a range whose midpoint is below analyst estimates of $0.53 per share. Regarding its full-year 2026 earnings estimate of “at least” $4 per share, Southwest declined to give an update “given the ongoing macroeconomic uncertainty.”

“Achieving this outcome would require lower fuel prices and/or stronger revenue performance to offset higher fuel expense,” Southwest said.

Southwest introduced bag fees last year, ending a more than five-decade-long “bags fly free” policy. Earlier this month, less than a year after the change, it joined its major US rivals in hiking its bag fees by $10 amid surging jet fuel prices.

Southwest, which discontinued its fuel-hedging program last year, said it spent $1.36 billion on fuel and related taxes in the first quarter, up 8.6% year over year.

Matt Phillips16h

ServiceNow dives after reporting sequential decline in profit margins

Cloud software giant ServiceNow — which has been something of a poster child for the AI-related software sell-off — saw its shares fall sharply after delivering Q1 results that included a quarter-on-quarter decline in profit margins.

The company reported:

Revenue of $3.77 billion, higher than the $3.75 billion analyst consensus estimate published by FactSet.
Diluted adjusted earnings of $0.97 per share, on point with the $0.97 analysts had expected.
Subscription revenue of $3.67 billion vs. the $3.65 billion predicted.
Non-GAAP gross margins of 79.5%, down from 80.5% in Q4.

ServiceNow issued guidance for Q2 subscription revenues of between $3.815 billion and $3.820 billion, compared to the $3.75 billion FactSet consensus estimate.

ServiceNow shares have been at the epicenter of the software sell-off driven by the fear that such companies are at risk of being rendered obsolete by AI. The stock was down 33% for the year through the end of the New York trading session on Wednesday.