Software stocks slide as Fortinet, ServiceNow fail to meet lofty investor expectations
Read a summary of this article on FAST.
Get bite-sized news via a new
cards interface. Give it a try.
Click here to return to FAST
Tap here to return to FAST
FAST
Oct 29 : Shares of software companies tumbled in premarket trading on Thursday following disappointing results from Fortinet and ServiceNow, deepening worries about AI disruption that has plagued the sector.
Software companies have been under intense scrutiny this year as investors weigh the likelihood of newer AI models disrupting traditional business models.
The S&P 500 Software & Services Index has managed a 6 per cent year-to-date rise, just about half the gains recorded by the S&P 500.
Fortinet was down 26 per cent and was the top decliner on Wall Street’s benchmark index.
Guess Word
Crack the word, one row at a time
Buzzword
Create words using the given letters
Mini Sudoku
Tiny puzzle, mighty brain teaser
Mini Crossword
Small grid, big challenge
Word Search
Spot as many words as you can
The company raised its annual results expectations. However, analysts pointed to decelerating revenue growth in its services unit, reflecting a high bar set for the company, whose stock has rallied 119 per cent this year.
At least fourteen brokerages cut their price targets on the stock, including Piper Sandler, Jefferies and Deutsche Bank.
“We remain on the sidelines as we await evidence that new areas such as protecting east-west traffic from agentic adoption, large firewall AI data center-related deals, and (operation technology), can truly continue firewall momentum,” said Scotiabank, which cut its price target on Fortinet to $140 from $163.
“Similarly, we would like to see Fortinet’s SASE and SecOps offerings demonstrate greater enterprise traction in upcoming results.”
ServiceNow slid 18.5 per cent as a third-quarter profit miss overshadowed a raise to its full-year subscription revenue and cash flow margin outlook.
At least ten brokerages lowered price targets on the stock, with analysts at Raymond James pointing to lagging subscription revenue and backlog growth, while AI initiatives are yet to materialize. The brokerage has an “outperform” rating on the stock but lowered its price target to $130 from $135.
The companies’ results weighed on other software stocks. Salesforce fell 5.4 per cent, Palo Alto Networks slid 6.5 per cent, Atlassian lost 7 per cent and Zscaler shed 5.8 per cent.
Alphabet’s Google on Wednesday unveiled Gemini 4 Carbon, its latest frontier AI model, stepping up competition with OpenAI and Anthropic as the race to build more capable coding and cybersecurity systems intensifies.
Source: Reuters
Sign up for our newsletters
Get the CNA app
Stay updated with notifications for breaking news and our best stories
Get WhatsApp alerts
Join our channel for the top reads for the day on your preferred chat app
Get bite-sized news via a new
cards interface. Give it a try.
Click here to return to FAST
Tap here to return to FAST
FAST
