Software stocks plunge 1.9% as Datadog, HubSpot, Figma miss

Software stocks tumbled in early US trading as disappointing results from Datadog, HubSpot and Figma dragged the North American tech software index ETF down 1.9 percent to $99.39, after touching an intraday low of $97.61, a drop of more than 3.6 percent.

The selloff was concentrated in names that reported earnings, with Datadog falling 14.6 percent to $241.71 and HubSpot dropping 19.9 percent to $200.38, while Figma slid 17.4 percent to $23.25. The declines came as investors weighed guidance and valuation against slowing growth across the SaaS sector.

Other software names followed. Salesforce fell 4.1 percent to $185, ServiceNow slipped 2 percent to $114.85, and Atlassian dropped 3.6 percent to $109.22. MongoDB eased 0.8 percent to $373.45 and Cloudflare slipped 0.9 percent to $290.18. Snowflake bucked the trend, rising 1.2 percent to $320.57.

The simultaneous double-digit declines in three major software names point to broader concerns about fundamentals and guidance, threatening to accelerate rotation out of software and SaaS stocks. The moves come as the wider market rallied, with the S&P 500 up 1.18 percent and the Nasdaq 100 up 1.40 percent, a contrast that shows the selloff was specific to the sector.

Earnings Misses Hit the Highest-Flying Names

Datadog, the observability platform that had been a Wall Street favorite, fell to an intraday low of $225.26 before settling at $241.71. HubSpot, the marketing software maker, touched $185.05 before recovering to $200.38. Figma, the design collaboration tool, sank to $22.14 before closing near $23.25.

The pattern mirrors a broader tension in the software sector: companies that grew rapidly during the AI spending boom now face tougher comparisons and questions about whether their guidance can justify premium valuations. The declines came even as the wider market climbed, with the S&P 500 posting a 2.5-week high and the Nasdaq 100 a 1-week high, according to market data.

The moves echo a pattern seen across the sector this earnings season, where companies that beat on revenue but disappointed on forward guidance were punished more harshly than those that simply missed. Datadog, which competes with New Relic and Splunk in observability, and HubSpot, which faces Salesforce in marketing automation, both saw their shares fall despite the broader market's advance.

Investors Weigh Guidance Against Slowing Growth

The selloff stands in contrast to earlier strength in software, when Oracle rose more than 5 percent, ServiceNow gained more than 3 percent and Salesforce added more than 2 percent on the day. That divergence suggests investors are now discriminating sharply between names with confirmed AI-driven demand and those whose results disappointed.

The broader earnings backdrop remains strong — Bloomberg Intelligence forecasts Q2 earnings may increase by 23 percent, and 86 percent of the 307 S&P 500 companies that have reported so far beat estimates. AI infrastructure stocks are expected to contribute nearly 60 percent of the S&P 500's earnings-per-share growth in the quarter, according to Bloomberg data, a concentration that leaves software names without direct AI exposure more vulnerable to de-rating.

For investors, the question is whether the declines mark a one-off earnings reaction or the start of a broader de-rating. Snowflake, which rose 1.2 percent to $320.57, was the notable exception, suggesting buyers remain selective rather than abandoning the sector entirely. Software and SaaS stocks with high revenue multiples face the most pressure if the selloff broadens into the next earnings cycle, particularly those whose guidance fails to keep pace with the AI-driven growth already priced into their shares.

This article is for informational purposes only and does not constitute investment advice.