AI Anxiety Returns: ServiceNow, IBM Earnings Drag Software Shares Down

Enterprise software shares plummeted in Thursday’s premarket session. Traders reacted to quarterly reports from ServiceNow Inc. (NYSE:NOW) and International Business Machines Corp. (NYSE:IBM).

Nasdaq futures are down 0.36% while S&P 500 futures have shed 0.39%.

Despite both companies exceeding analyst estimates, cautious outlooks reignited concerns that artificial intelligence is structurally breaking the traditional software-as-a-service (SaaS) business model.

Geopolitical Tensions Stall ServiceNow Momentum

ServiceNow reported first-quarter revenue of $3.77 billion, surpassing the $3.74 billion consensus estimate. However, shares fell 12% in early trading. CFO Gina Mastantuono cited a “prudent view of the geopolitical environment” as a factor in the company’s guidance.

Specifically, the company flagged delays in Middle East deals due to the ongoing conflict.

IBM Growth Decelerates Amid AI Competition

IBM shares shed over 7% premarket after revenue growth slowed to 9%, down from 12.2% in the previous quarter. Growth in the critical software segment also showed signs of cooling, rising 11.3% compared to 14% in the prior period.

Investors are increasingly worried that AI allows companies to build proprietary tools rather than pay high subscription fees. This shift threatens to compress margins and reduce the need for standard software licenses across the industry.

The negative sentiment spread rapidly to other platform leaders on Thursday morning.

Broader market pressure added to the decline as peace efforts in the Middle East stalled amid reports of vessel seizures in the Strait of Hormuz.

Premarket Performance

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