Bill McDermott Fights Back Against ‘Saaspocalypse'—Will Investors Follow?
The move by ServiceNow's CEO is a positive, but here's what we think the market really wants to get software stocks going again.
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Software companies are attempting to fight back against the AI-worry-fueled “Saaspocalypse” that has hammered stock prices in one of the stock market’s more memorable knee-jerk reactions.
As we discussed last week, and touched on again in today’s Pro Portfolio video, we continue to favor those software companies partnering with AI companies like OpenAI and Anthropic to drive AI adoption and usage in the enterprise. And yes, there will be some companies that see AI challenge their business models, just like we saw the internet do more than 20 years ago.
But we are now seeing companies fight back, and for some, that means releasing results sooner than expected. For others, such as ServiceNow (NOW) , it means many top executives are cancelling regularly scheduled stock sales via 10b5-1 plans, while CEO Bill McDermott gets ready to commit $3 million to but NOW stock on February 27 at “prevailing market prices.” Those are nice developments, and odds are ServiceNow is also leaning heavily into its $9.5 billion stock repurchase plan.
While these developments are likely to help lift NOW shares somewhat in the near-term, it did not yield the hoped-for reaction on Tuesday. A more convincing demonstration would be an upbeat ServiceNow management presentation at an upcoming investor conference or perhaps a mid-quarter update.
There are multiple investor conferences in the coming weeks, but as of now, we do not see ServiceNow, Cisco (CSCO) , Salesforce (CRM) , Microsoft (MSFT) , IBM (IBM) , or others like them presenting. We will continue to watch if any are added to the Morgan Stanley Technology, Media & Telecom conference being held in early March.
And while it would be a rather rare move, another option would be for ServiceNow or some of those other software companies to provide a mid-quarter update or pre-announce first-quarter 2026 quarterly results in March or early April. If they were to furnish a mid-quarter update, looking at the calendar, we would say that now is the time, which likely means a low probability of it happening.
While we check on updated conference lineups, we'll look forward to quarterly earnings from Nvidia (NVDA) , Salesforce, Snowflake (SNOW) , and Elastic (ESTC) next week. Our focus will be on what is said about AI adoption and usage across customers as we also look to see if RPOs, backlog levels, or total contract value figures rise on a quarter-over-quarter basis. If that is what we see, it will be those figures that help stoke investor appetite for select software stocks.
At the time of publication, TheStreet Pro Portfolio was long NOW, MSFT and NVDA.
