Software investors start to return
Snowflake (SNOW) jumped more than 20% (up 21% on the day) after a big beat and raised guidance. It beat on the top line, beat on the bottom line, and raised. The quarter was impressive and feeds a growing story that investors can start moving back into software. This looks like the first cautious step back in, not a full return.
Older, legacy software names still have plenty of work to do. Adobe (ADBE) and Salesforce (CRM) fall in that group. Newer players are getting more attention from investors.
AI as a spending catalyst
Whether enterprise AI helps or hurts a given software company depends on the company. Some get a tailwind from AI, some face a headwind. The one thing investors reward across the board is acceleration. Companies showing signs of acceleration, or the early start of it, get rewarded, no matter if they grow single digits, double digits, or fast like Snowflake.
Salesforce (CRM) is an example. Its stock reacted well the day after earnings because net new bookings looked to be accelerating.
HPE: good numbers, weak reaction
Hewlett Packard Enterprise (HPE) fell about 5% after hours (down about 5.5% on the day) despite strong results. The shares had run up roughly 114% going into the print, so a lot was already priced in. Buy-side investors seemed to want a digestion period. The numbers were genuinely good, and the company has a strong story: it operates on the networking side of the data center business and has a lot of room to grow. Even great numbers cannot always beat a stock's strong run-up heading into a report. Strong earnings alone are no longer enough to clear high expectations.
Cybersecurity demand rising with AI threats
Concern about AI-driven attacks has moved to the top of the priority list at nearly every company. In many cases companies are getting more cybersecurity budget, not just reallocating what they have.
The arrival of a model able to find software weaknesses, and even chain those weaknesses together to build working exploits, alarmed chief security officers. Sooner or later those abilities reach bad actors. That fear is driving more talks between enterprise customers and their largest platform cyber vendors, such as CrowdStrike (CRWD) and Palo Alto Networks (PANW).
A second driver of cyber spending: companies need to govern and secure their own use of AI. They want to make sure employees use AI responsibly and that bad actors cannot exploit external AI agents through prompt injection to disrupt the business. All of this is pushing cyber budgets higher, and the very largest vendors benefit most.
Zscaler (ZS) rose about 2.5% on the day.
