Tag: software stocks

  • S&P 500 Holds Steady as Chip and Software Declines Offset Broader Market Gains

    S&P 500 Holds Steady as Chip and Software Declines Offset Broader Market Gains

    The S&P 500 traded near the flatline on Thursday as steep losses in chip and software stocks offset gains across most other sectors. Investors weighed corporate earnings, labor data, and ongoing negotiations over reopening the Strait of Hormuz.

    At 11:20 a.m. ET, the S&P 500 slipped 0.08% to 7,723. The Dow Jones Industrial Average added 0.49% to 54,350, while the Nasdaq Composite edged up 0.05% to 26,380.

    Western Digital and Sandisk Shares Tumble

    Western Digital shares fell 18.5% in early trading despite reporting fourth-quarter results above Wall Street estimates. Its fiscal first-quarter forecast disappointed investors. Sandisk shares dropped 11.3% after releasing its fiscal fourth-quarter results. Both companies forecast quarterly revenue above estimates, driven by demand for artificial intelligence infrastructure. However, investors focused on valuations after significant gains earlier this year — Western Digital had climbed about 200%, and Sandisk had gained around 400%.

    Hank Smith, investment strategy director at Haverford Trust, noted that expectations had reached demanding levels, calling the price action “some digestion going on in the market.”

    The Philadelphia Semiconductor Index declined 1.5% during early trading. Intel and AMD also traded lower, adding pressure to the technology sector. However, several chip stocks later recovered: Broadcom gained nearly 2%, Marvell Technology rose about 3%, and NVIDIA moved higher during the session.

    Software Earnings Add Pressure to Technology

    Software stocks also recorded steep declines following several earnings reports. Atlassian, Salesforce, Adobe, and Zscaler traded lower. AppLovin shares fell about 17% after missing quarterly revenue estimates. The stock had previously benefited from investor demand for AI-linked companies. Datadog dropped roughly 17% after management forecast slower revenue growth in the third quarter, raising questions about enterprise software demand and valuations.

    Peloton shares fell more than 14% after forecasting lower sales in the coming fiscal year, citing higher prices for equipment and subscriptions. Still, Microsoft and Amazon each gained around 1%, helping limit broader losses across major indexes.

    Most S&P 500 Sectors Trade Higher

    Despite technology weakness, nine of the S&P 500’s 11 sectors traded higher during the morning session. Energy, consumer staples, and healthcare led the gains. Parker-Hannifin rose 8.5% after forecasting annual profit above analysts’ estimates. Albemarle gained 6.7% after beating quarterly profit estimates. Diageo rose about 6% after announcing a three-year plan targeting $1.2 billion in savings.

    Restaurant Brands International reported adjusted earnings of $1.07 per share, above the expected $1.03. Revenue reached $2.52 billion, matching estimates. Burger King recorded an 8.5% increase in comparable restaurant sales, though other brands within the group delivered weaker results.

    Labor Data Sets Up July Jobs Report

    New applications for unemployment benefits increased slightly to 199,000 for the week ending August 1, below the Dow Jones estimate of 204,000. Layoffs fell to their lowest level in two years during July. Second-quarter productivity increased 1.4% (versus 0.8% prior), while unit labor costs rose 1.3% (below the 2.1% estimate). Investors will now examine Friday’s July employment report for clues about the Federal Reserve’s policy path. Fed Chairman Kevin Warsh has reduced forward guidance, increasing the market’s focus on incoming economic data.

    Iran Talks Keep Oil and Gold in Focus

    Brent crude traded near $80 per barrel as investors monitored negotiations involving Iran and Oman focused on reopening shipping routes through the Strait of Hormuz. An Iranian official said a temporary agreement would allow ships to travel without fees or tolls, but final conditions had not been settled. Deutsche Bank strategist Jim Reid noted “unresolved questions” about whether Iran could later charge vessels.

    Gold rose for a fourth consecutive session as geopolitical uncertainty supported demand. Spot gold gained 0.6% to $4,271.33 per ounce, and US gold futures rose 0.6% to $4,330.20. Earlier, spot prices reached their highest level since June 18.

    Conclusion

    Technology losses kept the S&P 500 near the flatline, despite gains across nine of its 11 sectors. Western Digital, Sandisk, AppLovin, and Datadog recorded the sharpest declines following earnings updates. Meanwhile, investors monitored Iran-Oman shipping talks and Friday’s July employment report, both of which could shape energy prices and Federal Reserve rate expectations.

  • IBM Revenue Warning Sparks Widespread Decline in Software Stocks

    IBM Revenue Warning Sparks Widespread Decline in Software Stocks

    IBM shares plunged more than 22% in premarket trading Tuesday after the company issued a preliminary second-quarter earnings warning, citing weaker software and infrastructure results as customers redirected spending toward AI hardware. The warning triggered a broad sell-off across major software stocks, including Microsoft, ServiceNow, Salesforce, and Intuit, which fell between 3% and 5%.

    IBM expects second-quarter revenue of $17.2 billion, up 1% year-over-year but below the analyst consensus of $17.86 billion compiled by LSEG. Adjusted earnings are projected at $2.93 per share, compared to the forecast of $3.02 per share. The company attributed the shortfall to a significant shift in customer spending during the final weeks of June, as businesses accelerated capital expenditures on servers, storage, and memory chips for artificial intelligence systems ahead of anticipated price increases and supply constraints.

    CEO Arvind Krishna acknowledged that while IBM anticipated some supply-chain pressure, it “did not anticipate the magnitude” of the spending shift. He also noted that rapidly evolving cybersecurity concerns distracted clients and impacted purchasing decisions. Preliminary figures show software revenue rose 5% in the quarter, consulting revenue remained flat, and infrastructure revenue declined 7%, driven by weaker Z mainframe performance and related transaction-processing software.

    Despite the overall miss, several business areas posted gains. Red Hat revenue increased 11%, while recent acquisitions HashiCorp and Confluent delivered stronger results. Distributed infrastructure revenue rose 37%, supported by demand for Power systems and storage products. The z17 mainframe program reached nearly 130% of the comparable z16 stage, and the distributed infrastructure backlog stood at approximately $500 million at quarter-end.

    IBM reported a GAAP gross profit margin of 57.7%, down one percentage point year-over-year, and an adjusted gross margin of 59.4%, down 0.7 percentage points. GAAP earnings were $2.27 per share, while adjusted earnings rose 5% to $2.93. Operating cash flow through June totaled $7.8 billion, and free cash flow reached $4.8 billion.

    The earnings warning pressured the broader software sector before Tuesday’s market open. The iShares Expanded Tech-Software Sector ETF dropped more than 4%. Analysts noted that IBM’s update reflects a broader shift in corporate technology budgets toward data centers, chips, storage, and networking equipment, leaving less quarterly spending available for traditional software purchases.

    IBM plans to release its complete second-quarter financial results on July 22, with an earnings call scheduled for 5 p.m. Eastern Time. Management stated that current figures are preliminary and may differ slightly from the final numbers. The company will provide further detail and discuss full-year expectations during the call.