Shares of Salesforce, UiPath and other enterprise software companies are weakening after poor results

Panicked by both Salesforce’s terrible earnings reports
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com and UiPath — along with cautious commentary from security software vendors Cloudflare and Okta — investors aggressively sold off enterprise software stocks on Thursday, causing massive losses at some of the industry’s best-known companies.

Salesforce shares fell about 20% on Thursday after the software maker slightly lowered its full-year outlook, reporting April financial results that missed Wall Street estimates for revenue, margins and remaining commitments. Among other things, Salesforce stated that the aggressive use of AI-based software will not result in a material improvement in results in the current fiscal year.

Bernstein analyst Mark Moerdler, who has an Underperform rating on Salesforce stock, said in a recent research report that he is concerned that IT software budgets have been squeezed and that the expected reacceleration in software development will not actually happen. He also worries that CIOs will take dollars from other areas to fund AI projects.

As a result, he wrote, IT departments are looking for ways to “optimize” their spending – which is a good way of saying they’re looking for places to cut their budgets.

The problems are not limited to Salesforce.

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Process automation software provider UiPath not only lowered its full-year outlook when it announced first-quarter results on Wednesday, it also unexpectedly announced that CEO Rob Enslin was leaving and that he would be replaced by company co-founder Daniel Dines in June. UiPath shares ended Thursday down 34%.

Okta reported strong first-quarter results on Wednesday, but the guidance was more conservative than investors expected. And during a call with analysts, Cloudflare CEO Matthew Prince expressed a cautious view on the global economic outlook, as BTIG analyst Gray Powell noted in a recent research note. Shares of Okta and Cloudflare closed 7.8% and 9.6% lower, respectively, on Thursday.

As a result, investors are concerned about the prospects for spending on enterprise software and are moving en masse to exit their investments.

Among the largest enterprise software makers, ServiceNow fell 12% on Thursday, Rubrik fell 8.4%, Adobe fell 6.6%, Oracle fell 5.4% and SAP fell 5.3%. Microsoft

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decreased by 3.4%.

Cloudflare and Okta news puts pressure on security software stocks. Crowdstrike closed down 9.6%, SentinelOne fell 6.3% and Palo Alto Networks lost 4.5%.

Other software names with losses exceeding 5% per day include Intuit, Docusign, PagerDuty and MongoDB
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Investors appear to be focusing on the clearer winners in artificial intelligence – such as C3.ai, which reported strong results for the quarter ended in April and whose shares were up 19% on Thursday. Palantir ended the session up 3.8%, Hewlett-Packard Enterprise gained 1.9% and SoundHound AI

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increased by 3.8%.

In an interview with Barron’sC3.ai CEO Tom Siebel asserted that AI may actually be a headwind, not a tailwind, for some legacy enterprise software companies.

“These guys have stacks of technology that they literally built last century,” Siebel said. “They took the AI sticker and put it on the front of their box – ServiceNow, Salesforce, Workday, Oracle, SAP. I’m not entirely sure the dog hunts.

Write to Eric J. Savitz at [email protected]