SaaSpocalypse software stocks split after earnings reports

SaaSpocalypse software stocks moved sharply in opposite directions around the latest earnings reports, as investors weighed near-term execution against the longer-term risk that artificial intelligence could weaken parts of the sector. Atlassian and Twilio rose after reporting results that exceeded expectations, while HubSpot had closed 19% lower on Thursday after issuing weaker forward revenue guidance, according to Business Insider.

The divergent reactions have sharpened a debate that had already driven significant volatility in cloud-software shares. CNBC reported that the iShares Expanded Tech-Software Sector ETF fell 24% in the first quarter, its weakest performance since 2008, before recovering to stand down 3% for the year. The Nasdaq, by comparison, was up 15%, CNBC said.

What is driving SaaSpocalypse software stocks?

“SaaSpocalypse” refers to investor concern that AI coding tools and AI-native rivals could replace some software-as-a-service products or reduce their pricing power and renewal economics. The concern does not establish that AI will displace software across the sector. Rather, recent results show investors distinguishing between companies’ current performance and their perceived ability to retain customers and defend their products as AI capabilities develop.

RBC Capital Markets analyst Matt Hedberg told CNBC that companies could use coding agents to create functionality, potentially putting pressure on some renewals. Separately, Pinsent Masons reported a UBS assessment that workflow-focused tools may face greater exposure where their main value lies in interfaces and process coordination that AI agents could reproduce or bypass.

The same UBS view held that software embedded in regulated, highly customised and business-critical operations may be harder to replace. Governance, compliance, auditability and the costs of changing deeply integrated systems can raise barriers to switching, according to the account published by Pinsent Masons.

Earnings produced sharply different signals

Atlassian reported fiscal fourth-quarter revenue of $1.77 billion, up 28% from a year earlier and ahead of the $1.66 billion analyst estimate cited by Business Insider. Adjusted earnings were $1.87 a share, against a $1.50 consensus forecast, while cloud revenue rose 31% to $1.2 billion. CNBC said Atlassian shares gained more than 20% on Friday after the results.

Twilio reported second-quarter revenue of $1.50 billion, up 22% and above the $1.43 billion forecast cited by Business Insider. Adjusted earnings of $1.47 a share also exceeded the $1.32 consensus, and the company generated $353 million of free cash flow. Its third-quarter revenue guidance had a $1.51 billion midpoint, above the roughly $1.47 billion Wall Street estimate. CNBC likewise reported a gain of more than 20% for Twilio shares on Friday.

HubSpot’s second-quarter revenue and adjusted earnings also exceeded cited consensus expectations. Its third-quarter revenue outlook, however, was $924 million to $925 million, below the roughly $941 million expected by analysts, and it reduced the midpoint of its full-year forecast by $22 million. Business Insider reported that management cited longer buying processes and tighter customer budgets, while customer additions of 7,000 fell short of its expectation of 9,000 to 10,000.

The results offer company-specific evidence rather than a verdict on AI’s sector-wide effects. Pinsent Masons also relayed an HSBC view that markets may have overstated AI risks to software, citing revenue growth and company forecasts. That remains an analyst assessment as investors continue to test whether AI becomes a source of new demand, a productivity tool for vendors, or a competitive challenge to particular products.

This story draws on original reporting from CNBC.