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US software stocks reached fresh 2026 highs as earnings expectations rose and several analysts said AI disruption fears were overstated. The S&P 500 software and services index (.SPLRCIS) gained 1.3% Tuesday, reaching its highest level since November 2025. Strong company earnings and AI partnerships supported a recovery underway since late June. LSEG data showed expected 2026 earnings growth rising to 20.6% from 13.8% at March’s end. The index previously fell over 26% amid fears of cheaper AI-built applications. Zacks Investment Management’s Brian Mulberry said greater data center capacity could make AI coding a bigger threat in the second half of 2027.
Shopify has made AI use a baseline employee expectation, incorporating it into performance reviews, project prototyping and hiring decisions. The company introduced its Sidekick assistant in 2023 and is preparing for “agentic commerce” by making merchants’ product catalogs accessible to AI developers including OpenAI and Anthropic. Analysts expect revenue to exceed $15 billion this year, up from about $7 billion in 2023, while head count fell from roughly 11,600 at the end of 2022 to 7,600 last year. Shopify said second-quarter AI-driven store traffic and orders tripled year over year. Its shares, however, are down more than 15% this year and trade at about 57 times forward earnings.
PwC projects global AI infrastructure spending will total $31.6 trillion through 2050, with annual data-center capital expenditure rising from about $800 billion to $1.8 trillion. Investment is expected to accelerate because servers and GPUs require frequent replacement, benefiting Nvidia, but continued funding depends on rising adoption, revenue and returns. Amazon, Microsoft and Google face public and political opposition to data-center expansion. Separately, Google Cloud and Accenture formed a unit to deploy Gemini Enterprise, with Google training up to 1,000 Accenture forward-deployed engineers. Enterprise AI returns remain inconsistent because integration and organizational redesign are difficult. Meanwhile, corporate-software incumbents have reported strong results despite earlier fears that AI coding tools would displace them.
AI is disrupting corporate software more slowly than investors feared. Although new tools from Anthropic and OpenAI can generate code cheaply, maintaining, updating and integrating software remains difficult, while incumbent products are deeply embedded in customers’ IT systems and purchasing habits. Salesforce recently beat sales and profit forecasts, raised its outlook, and expanded its Anthropic partnership to bring Claude into its software; its shares rose more than 22% afterward. ServiceNow, Snowflake and Workday also reported strong results linked partly to AI. Risks remain from AI companies entering corporate software, cheaper open-weight models and AI-native startups. Incumbents may face pressure for shorter contracts and outcome-based pricing, but AI has not displaced them.
SAP CEO Christian Klein is restructuring Europe’s software giant around AI as supervisory board members warn it needs a breakthrough within months or risks falling behind. SAP plans 50 AI assistants, more than 400 autonomous agents and a new business AI platform, but customers report muted demand for its Joule products and question whether promised capabilities can be delivered. Legacy-system users have resisted costly cloud migrations, prompting SAP to offer limited AI integration with on-site software despite technical uncertainty. Klein has assumed AI product oversight and restricted non-AI spending, while employee trust has fallen. SAP retains a strong core business, but clients are increasingly deploying rival tools, including Microsoft Copilot.
ServiceNow Chief Innovation Officer Dave Wright says enterprise software remains essential for turning AI reasoning into returns by orchestrating workflows, enforcing governance and handling failures. He sees major potential in companywide digital twins that could simulate price changes, regulations or expansion and generate remediation plans. However, businesses must first digitize workflows, while complex simulations may require undeveloped quantum computing. Wright expects convergence among agentic and physical AI, robotics, quantum technology and digital twins. Separately, Chinese AI leaders Tang Jie of Z.AI and Yang Zhilin of Moonshot AI reflect decades of domestic research. Anthropic has accused both companies of prohibited large-scale distillation; neither has commented.
Software companies are using executive stock forfeitures, sales pledges, product rebranding, leadership changes and buybacks to counter investor fears that AI will erode their businesses. Figma’s Dylan Field surrendered about $46 million in awards, while ServiceNow and Intuit executives pledged not to sell shares. Salesforce and Oracle have added AI branding to existing products, though investors remain skeptical because revenue has not accelerated broadly. Adobe, Workday and C3.AI have pursued leadership changes. Some infrastructure software stocks have recovered, including Palantir, Snowflake and Microsoft. Salesforce borrowed $25 billion for a record debt-funded accelerated buyback, while Adobe repurchased nearly $16 billion over 18 months.
Major U.S. companies including Alphabet, CSX, Booz Allen Hamilton, Snap-on and ServiceNow are planning modest or targeted hiring as demand grows and employers reassess AI’s capabilities. Booz Allen, whose head count fell 7.5% to about 30,900 by June 30, said it needs to accelerate hiring, particularly for national-security work. Lattice CEO Sarah Franklin said companies increasingly recognize that humans, including entry-level workers, must work alongside AI. Alphabet is hiring in AI and cloud computing, while ServiceNow seeks sales executives. Layoffs and jobless claims have declined, but MIT professor Paul Osterman cautioned that AI’s eventual workforce impact remains highly uncertain.
US stock futures fell as concerns about AI spending and rising oil prices weighed on sentiment. S&P 500 futures dropped 0.6% and Nasdaq 100 futures declined 0.8%. Alphabet slid 5% after forecasting higher-than-expected capital spending as free cash flow turned negative, while Tesla lost 6.7% following a profit decline. Oil rose for a fifth day, with Brent above $98 amid the intensifying Iran war and a claimed Houthi attack on commercial shipping, pushing bond yields higher. Intel gained 0.7% before earnings. American Airlines, Albertsons and Rollins fell, while Lockheed Martin and ServiceNow rallied on improved forecasts or better-than-expected results.
US stock futures declined Thursday as investors assessed whether heavy AI spending is producing growth. S&P 500 futures fell 0.2% and Nasdaq 100 contracts slipped 0.4%. Alphabet dropped almost 5% after raising its annual capital-spending forecast to as much as $205 billion, despite better-than-expected cloud revenue. Tesla missed earnings estimates, while IBM cut its sales outlook. West Texas Intermediate crude gained 1.1% to $87.80 amid escalating US-Iran tensions and supply concerns. Higher energy prices pressured Treasuries and raised inflation concerns before next week’s Federal Reserve meeting, with markets pricing a 30% chance of a rate increase. Asian futures indicated a mixed opening.
ServiceNow posted higher revenue in the second quarter and narrowed its outlook range.
The workflow manager on Wednesday posted a profit of $298 million, or 29 cents a share, in the quarter ended June 30, compared with $385 million, or 37 cents a share, a year earlier.
Stripping out certain one-time items, adjusted per-share earnings were 90 cents, ahead of the 86 cents anticipated by analysts, according to FactSet.
Revenue rose 24% to $3.99 billion, boosted by a similar growth rate for subscription revenue. Analysts surveyed by FactSet forecast revenue of $3.93 billion.
The company said sales were boosted by strong demand from the U.S. federal government, which accelerated some on-premise subscription revenues.
Annual contract value also outperformed in the second quarter, with 123 transactions with contract values of more than $1 million. That marked a nearly 40% increase year over year and prompted ServiceNow to raise the bottom end of its subscription sales outlook range.
ServiceNow expects full-year subscription sales to be $15.76 billion to $15.78 billion, compared with a prior range of $15.74 billion and $15.78 billion. Analysts are projecting $15.75 billion in annual sales.
For the third quarter, the company guided for subscription revenue of $3.98 billion to $3.98 billion, below the $4.01 billion that Wall Street is estimating.
ServiceNow Inc. reported better-than-expected quarterly sales and bookings, boosting Wall Street’s hopes that the software maker’s new artificial intelligence tools will spur growth.
Subscription revenue increased about 25% to $3.88 billion in the period that ended June 30, the company said Wednesday in a statement. Current remaining performance obligations, a measure of near-term bookings, jumped 21% to $13.2 billion. Both measures exceeded analyst estimates.
New AI business continues to outpace expectations, Chief Financial Officer Gina Mastantuono said in the statement. The results highlight “ServiceNow’s broad-based demand, strong execution and operating leverage,” she said.
The Santa Clara, California-based company makes tools to help corporations manage their technology and support operations. Like many software providers, ServiceNow is fighting to prove it can monetize AI and ward off new competition.
The shares rose about 4% in extended trading after closing at $95.46 in New York. The stock had dropped 38% this year through Wednesday’s close, mirroring a slide from peers such as Salesforce Inc. and Workday Inc.
The company said it has crossed $1 billion in annual contract value for its AI offerings. ServiceNow said it ended the second quarter with 658 customers with more than $5 million in annual contract value, up from 630 in the previous period.
ServiceNow slightly increased its full-year outlook for subscription revenue growth, from a rate of just more than 22% to almost 23%.
IBM’s warning that second-quarter sales missed expectations showed customers redirecting spending toward AI servers, storage and memory, sending its shares down 25% in their worst day in decades. Strategists said the shift is pressuring non-AI tech providers as finite capital budgets favor AI infrastructure and security. Salesforce and ServiceNow have each lost about a third this year, while the semiconductor index is up 68% despite a recent pullback. Bloomberg Intelligence’s Anurag Rana said Workday and SAP may also be hurt, with cloud backlogs and subscription sales potentially missing estimates. Cybersecurity remains a bright spot, with its index up 46%.
IBM shares fell 25 per cent after the company warned second-quarter revenue rose only 1 per cent, below analysts’ 5 per cent expectation. Chief executive Arvind Krishna attributed the weakness to customers shifting regular IT budgets toward AI-related servers, storage and memory, as well as disruption from cybersecurity concerns linked to Anthropic’s Mythos model. The article says the warning raises questions about whether AI infrastructure spending is starting to crowd out other IT demand and whether rising component costs could restrain AI services. Investors also sold shares in software groups such as ServiceNow and Adobe, while chipmakers including Nvidia and Micron are benefiting from high margins.
IBM shares dropped more than 25% Tuesday, their worst one-day fall on record, erasing $69 billion in market value after a rare profit warning ahead of second-quarter results. IBM cited clients shifting capital spending toward servers, storage and memory to secure scarce AI infrastructure before expected price increases. CEO Arvind Krishna said the company underestimated the scale of this reprioritization. IBM also said z17 mainframe sales missed expectations and forecast infrastructure revenue down 7%. Other software stocks fell amid concerns AI spending is crowding out traditional tech budgets, though D.A. Davidson’s Gil Luria said IBM’s warning was partly tied to mainframe weakness.