ServiceNow Inc. signage during the Nvidia GPU Technology Conference in San Jose, California, on March 20, 2025.
David Paul Morris | Bloomberg | getty Images
Software stocks on Thursday slid deeper into an ongoing intense sell-off this year as investors recoiled from the sector on growing fears that artificial intelligence could upend many firms’ business models.
The iShares Expanded Tech-Software Sector ETF (IGV) dropped about 5% in morning trading, on pace for its biggest one-day decline as last April during the tariff-triggered downturn.The fund is now down about 21% from its recent high, pushing the software industry into bear-market territory and underscoring how quickly sentiment has turned against one of wall Street’s former favorite industries.
Month to date, IGV is down almost 14%, on pace for worst month as october 2008 when the fund fell 23%.
Cloud software stocks have started this year where they left off in 2025: sell-off mode.
The continued downward spiral is setting the stage for a flurry of acquisitions, investors told CNBC.
The WisdomTree Cloud Computing Fund, which tracks cloud software, has dropped more than 8% so far this year, while the Nasdaq is slightly up. Leading software names like Salesforce, ServiceNow and Adobe are down more than 14% after badly underperforming the market a year ago.
the overriding concern is that artificial intelligence will eventually displace key pieces of the enterprise stack, as IT buyers turn to AI agents to handle tasks currently handled by software vendors, both large and small. Those fears were amplified last week when Anthropic’s Claude launched an AI agent tool named Cowork that is aimed at the enterprise customer.
A senior investor at a large private equity fund w
ServiceNow Stock Declines After OpenAI Partnership Announcement
Table of Contents
ServiceNow’s stock experienced a six-day decline following its January 17, 2026, announcement of a partnership with OpenAI to integrate OpenAI’s models into its AI agent offerings for businesses.
Details of the ServiceNow-OpenAI Collaboration
ServiceNow announced on January 17, 2026, that it will leverage OpenAI’s models to enhance its AI capabilities, specifically focusing on providing AI agents to its business customers. This move positions ServiceNow to compete more directly with other software companies integrating similar AI technologies. The partnership aims to improve automation and efficiency within ServiceNow’s platform.
Stock Performance and Market Reaction
Despite the potential benefits of the OpenAI partnership, ServiceNow’s stock (NYSE: NOW) faced negative market reaction. Shares fell for six consecutive trading days before a slight recovery on January 23, 2026. As of January 23, 2026, ServiceNow stock was down 17% for the month of January.
Impact on Competitors
The announcement also affected the stock performance of ServiceNow’s competitors. HubSpot (NYSE: HUBS) and Atlassian (NASDAQ: TEAM) also experienced market fluctuations in the wake of the ServiceNow-OpenAI deal, indicating increased investor scrutiny of the competitive landscape in the AI-powered software market.
Here’s a summary of the ServiceNow third-quarter 2025 financial results, based on the provided text:
Key Highlights:
* Earnings per Share (EPS): $4.82 adjusted vs. $4.27 expected.
* revenue: $3.41 billion vs. $3.35 billion expected.
* Subscription Revenue: $3.3 billion (vs. $3.26 billion expected), representing 22% year-over-year growth.
* full-Year Guidance (Subscription Revenue): Raised to $12.84 – $12.85 billion (previously $12.78 – $12.80 billion).
* Stock split: A five-for-one stock split has been approved, effective in early December, to increase accessibility for retail investors.
* AI Growth: AI business is projected to surpass $500 million in annual contract value this year, with a goal of $1 billion by 2026.
* Net Income: $502 million, or $2.40 per share (up from $432 million,or $2.07 per share in Q3 2024).
* remaining Performance Obligations: $11.35 billion.
* Stock Performance: shares rose 4% after the bell, but are down about 13% year-to-date.
* Government Impact: Q4 guidance accounts for U.S. government uncertainty, but the company sees potential benefit from the government’s focus on cost efficiency and modernization. ServiceNow’s U.S.federal business grew over 30% in Q3.
Overall: ServiceNow reported strong third-quarter results, exceeding expectations for both earnings and revenue. The company is benefiting from the growing demand for AI solutions and has raised its full-year guidance. The stock split is intended to broaden investor participation.
Summary of the Workday Analysis
this article presents a bullish outlook on Workday (WDAY) despite its recent underperformance compared to peers like ServiceNow, SAP, and Salesforce. Here’s a breakdown of the key points:
* Strong Fundamentals: Workday has a strong position in the HR and financial management software space, serving a large and prestigious client base (over 11,000 organizations, >60% of Fortune 500). It boasts high customer retention (98%) and consistent mid-teens revenue growth.
* Past Success, Current Challenges: Workday successfully employed a “growth at all costs” strategy post-IPO, scaling revenue from under $300 million to nearly $9 billion. Tho, this strategy is becoming unsustainable due to the “law of large numbers” and a lack of significant profitability.
* Leadership Change as a Catalyst: A key turning point is the recent appointment of Carl Eschenbach as full-time CEO (February 2024), replacing co-founder Aneel Bhusri. The article argues Bhusri recognized the need for a different skillset to efficiently operate a large public company and proactively stepped aside.
* New Value-Focused Plan: Workday unveiled a multi-year plan focused on shareholder value, including:
* $5 billion share repurchase program
* Cost prevention measures aimed at expanding GAAP margins by nearly 10 percentage points (1,000 basis points)
* $15 per share free cash flow target by fiscal year 2028
* Elliott Investment Support: Elliott Investment Management has taken a significant $2 billion+ position in Workday and publicly supports the new management team and strategic direction.
In essence, the article argues that Workday is poised for a turnaround under new leadership with a renewed focus on profitability and shareholder returns, making it a potentially attractive investment prospect.