Software stocks crater on cautious AI guidance despite beating earnings

Software stocks crater on cautious AI guidance despite beating earnings

Apr 25, 2026
SaaStr AI SprinklerAS Gtm_strategy

The Gist

  • ServiceNow dropped 15% despite beating Q1 revenue by $30M
  • IBM fell 10% as software growth slowed from 14% to 11.3%
  • Market punishes legacy vendors for lacking bold AI narratives
  • YTD losses range from -20% (Toast) to -74% (Monday.com)
Key Quotes

The market isn’t saying software is dead. It’s saying two very specific things: 1. Seat-based pricing on human workflows is the exposed category. 2. Infrastructure beneath AI is the protected category.

Jason Lemkin

AI is killing one specific business model: charging $50-150 per seat per month for software that increasingly looks like something a model can do.

Jason Lemkin
Key Insights
  • Software stocks plummeted despite beating earnings due to cautious AI guidance, with ServiceNow dropping 15% despite reporting Q1 revenue of $3.77B, ahead of consensus.
  • IBM's revenue growth slowed to 9% from 12.2% the prior quarter, with software segment growth decelerating to 11.3% from 14%, leading to a 10% stock drop.
  • The market is re-rating software stocks, with seat-based pricing on human workflows being the most exposed category, while infrastructure beneath AI is protected.
  • ServiceNow introduced an 'Agentic ACV' tier where customers pay for tasks completed by AI agents rather than per-seat, reflecting a broader industry pivot.
  • AI is killing the business model of charging per seat for software that models can replicate, while minting a new model based on usage-based consumption of infrastructure and data platforms.
  • The software sector is being rebuilt with new rules, multiples, and winners, rather than dying.
Actionable Takeaways
  • Re-evaluate pricing models to shift from per-seat to usage-based or task-based pricing to align with AI-driven market trends.
  • Focus on infrastructure, security, and data platforms that benefit from AI adoption, as these are currently protected categories.
  • Monitor 12-month stock performance rather than YTD to identify companies successfully adapting to AI-driven market changes.
  • Reposition products to turn AI agents from a threat into a competitive wedge, as ServiceNow has done with its 'Agentic ACV' tier.
Data Points
  • 15-17% (ServiceNow's stock drop at the open.)
  • $3.77B (ServiceNow's Q1 revenue, ahead of the $3.74B consensus.)
  • 9% (IBM's revenue growth, down from 12.2% the prior quarter.)
  • 11.3% (IBM's software segment growth, down from 14%.)
  • 96% (DigitalOcean's YTD stock increase, one of the few green names.)
  • $117 to $85 (Drop in the iShares Expanded Tech-Software ETF (IGV) from its all-time high.)

RevBots.ai View:

AI Sprinkler vendors getting crushed for bolting on features while ARM players build native AI revenue engines.

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