What Happened?
A number of stocks fell in the afternoon session after quarterly results from two major companies raised fresh questions about AI's impact on the sector.
IBM declined about 10% after reporting slower Q1 revenue growth, with weakness in its software business. ServiceNow also fell after noting that delayed deals in the Middle East, tied to the Iran conflict, would affect its subscription revenue growth. NOW also expects recent investments in AI to weigh on margins in the near term.
The sector-wide move reflected an ongoing debate. Some investors have questioned whether AI tools will reduce demand for traditional software or change existing license models. The results were likely read through that lens, which contributed to selling across software names beyond the two companies that reported. Though neither cause was strictly about AI suggesting the contagion was thematic not fundamental. Also, given ServiceNow was viewed as AI-resilient, its miss weakened the "safe SaaS" case, causing some analysts to lower their estimates.
The stock market overreacts to news, and big price drops can present good opportunities to buy high-quality stocks.
Among others, the following stocks were impacted:
- Vulnerability Management company Rapid7 (NASDAQ: RPD) fell 5.9%. Is now the time to buy Rapid7? Access our full analysis report here, it’s free.
- Banking Software company nCino (NASDAQ: NCNO) fell 5.9%. Is now the time to buy nCino? Access our full analysis report here, it’s free.
- Vulnerability Management company Qualys (NASDAQ: QLYS) fell 6%. Is now the time to buy Qualys? Access our full analysis report here, it’s free.
Zooming In On Qualys (QLYS)
Qualys’s shares are somewhat volatile and have had 12 moves greater than 5% over the last year. In that context, today’s move indicates the market considers this news meaningful but not something that would fundamentally change its perception of the business.
The previous big move we wrote about was 2 days ago when the stock gained 5.3% on the news that analysts projected potential gains for cybersecurity companies as AI adoption grew.
The momentum was catalyzed by a KeyBanc survey of CIOs, which revealed a positive impact on cyber budgets within the next year due to Anthropic's Mythos AI model. Leading cybersecurity platforms are expected to benefit from the projected growth as enterprises expand their security budgets to stay ahead of the latest threats.
Qualys is down 36.8% since the beginning of the year, and at $82.76 per share, it is trading 46.2% below its 52-week high of $153.80 from November 2025. Investors who bought $1,000 worth of Qualys’s shares 5 years ago would now be looking at only $804.31.
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