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Software Stocks Plunge: ServiceNow, IBM Results Fuel AI Fears

Software stocks plummeted on Thursday, September 4, 2025, following disappointing earnings reports from ServiceNow and IBM. ServiceNow's stock fell 17%, citing Middle East conflict as a drag on subscription revenue, while IBM dropped 9% despite beating earnings estimates. The broader tech sector weakness, reflected in the iShares Expanded Tech-Software ETF (IGV) falling 5%, is attributed to escalating market fears. Investors are concerned that advanced AI tools may fundamentally disrupt the traditional cloud subscription model that underpins many software companies.

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Software Stocks Plunge: ServiceNow, IBM Results Fuel AI Fears

Software stocks experienced a significant downturn on Thursday, driven by disappointing earnings reports from major players like ServiceNow and IBM, amid escalating market concerns regarding artificial intelligence disruption.

Key Stock Performance on September 4, 2025

The tech sector saw notable declines across several major software companies on Thursday. The performance highlights include:

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  • ServiceNow: Shares dropped 17%, marking what was described as its worst single-day decline. Although the company slightly surpassed Wall Street's earnings estimates, it cited conflict in the Middle East as a 'headwind' impacting quarterly subscription revenue.
  • IBM: The stock fell 9%, despite the company beating expectations for both earnings and revenue, as it maintained its forward guidance.
  • Other Notable Declines:
    • Salesforce and HubSpot each fell approximately 9%.
    • Adobe and Intuit saw declines of roughly 7%.
    • Oracle dropped by about 5%.
    • Workday slid 10% and was down over 45% year-to-date.

Sector-Wide Impact and AI Concerns

The broader software sector reflected this weakness. The iShares Expanded Tech-Software ETF (IGV), which tracks the industry, fell about 5% on Thursday and was down approximately 18% for the year.

Market sentiment suggests that the primary driver for this sector-wide pullback is the growing apprehension that advanced AI tools and services, developed by companies such as Anthropic and OpenAI, may disrupt the established cloud subscription service model.

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