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Software Stocks Got Massacred, after Salesforce & UiPath Bloodbath. Bad Breath of AI? – WOLF STREET

UiPath -85% from peak just three years after IPO amid CEO chaos. When consensual hallucination fades… 

By Wolf Richter for WOLF STREET.

Software companies – despite all their efforts to coddle up to the AI hype and hoopla and be part of it – got whacked down today by two messy quarterly reports, suggesting that massive spending on AI hardware and AI services by their customers and potential customers was draining their budgets for other stuff.

The primary instigators were Salesforce which plunged 19.7% today, and UiPath which plunged 34%. Other software companies followed in their tracks.

UiPath [PATH] had gone public via IPO in April 2021 at $56 a share. After the “pop” on the first day of trading, shares closed at $69.00. They peaked in May 2021 at $85.12, giving it a market cap of $45 billion. This was a creature of what we have come to call consensual hallucination. But consensual hallucination eventually fades, sometimes fairly quickly. By June 2021, hot air came out of it.

Over the past five years, UiPath booked big losses every year, totaling $1.6 billion, including the $49 million loss it reported yesterday afterhours for Q1. Revenues in Q1 grew 16% to $335 million.

In Q1, the company “saw increased deal scrutiny and lengthening sales cycles for large multi-year deals,” it said, and lowered its guidance for revenues and operating margin.

In addition, the company announced that CEO Robert Enslin resigned “effective June 1” from his position of CEO and from the Board of Directors. He will be replaced by company co-founder Daniel Dines, who himself had been moved out as co-CEO in January this year, which had made Enslin the sole CEO. So now, Dines is the sole CEO.

Enslin, a former Google Cloud executive, had been hired as co-CEO in April 2022. At the time, Dines had said that he “brings the right balance of experience and skills to scale our operations, allowing me to focus on our company culture, vision, and product innovation, areas I am passionate about – and that bring considerable value to our employees and customers.”

I mean, the whole thing is corporate hogwash to cover up chaos.

Shares have now collapsed by 85% from the peak, and market cap has been whittled down to $6.9 billion. We’re proud to have the stock in our pantheon of Imploded Stocks, for which the minimum requirement is a price drop of 70% from the peak (data via YCharts).

Salesforce shares today plunged by $53.61, or 19.7%, the biggest one-day plunge since 2008, to $271.60, back where they’d first been in August 2020, and down by 31% from the high on March 1, 2024, after the company issued disappointing guidance, missed Wall Street estimates on revenues – the first miss since 2006 – which grew only 11%, as revenues from Professional Services and Other fell 9%.

During the conference call, it said that it saw budget scrutiny, longer deal cycles, deal compression, and slowing projects. AI spending by its corporate customers seems to be sapping everything else. And that would be bad news for other software companies.

What is most astonishing is the mindbender of a senseless rally in 2023 through March 2024, but that was a sign of our times (data via YCharts).

Many software companies were sharply marked down today, possibly subject to similar forces of wild and woolly AI spending sapping budgets for everything else.

Some Major Software Stocks Today
UiPath [PATH] -34.00%
Salesforce [CRM] -19.70%
ServiceNow [NOW] -12.0%
Cloudflare [NET] -9.60%
CrowdStrike [CRWD] -9.6%
Rubrik [RBRK] -8.4%
Okta [OKTA] -7.8%
Adobe [ADBE] -6.6%
SentinelOne [S] -6.3%
Oracle [ORCL] -5.4%
SAP ADR [SAP] -5.3%
Snowflake [SNOW] -4.9%
Palo Alto Networks [PANW] -4.5%
Microsoft [MSFT] -3.4%


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