Software stocks fell sharply in premarket U.S. trading Thursday as investor focus sharpened on recent reports from Microsoft and SAP that cast doubt on the pace and durability of cloud and AI-related expenditures.
Microsoft shares slid about 7% in early trading even though the company reported quarterly results that exceeded analyst estimates. The company posted adjusted earnings of $4.14 per share on revenue of $81.3 billion, both metrics ahead of forecasts. Attention instead centered on Azure, where revenue growth of 39% was only marginally above expectations and was slightly slower than the prior quarter's rate. That deceleration added to questions over whether hyperscale cloud growth can continue at the recent high rates investors have priced in.
SAP experienced an even larger premarket move, dropping roughly 16% after its latest update failed to reassure market participants. While the enterprise software group met expectations for fourth-quarter revenue, its reported cloud backlog and its 2026 cloud revenue outlook came in below forecasts. The shortfall amplified pressure on a stock that the article notes had already declined significantly since peaking in mid-2025.
The weakness at Microsoft and SAP pulled down the broader software complex in premarket trading. Datadog fell about 5.5%, Atlassian declined 4.3%, Workday dropped 3.9%, and Snowflake lost around 4.3%. Other large software names also slid: Salesforce was down roughly 4.6%, MongoDB slipped 3.7%, and Adobe declined nearly 2.6% in premarket action.
Taken together, the market reaction highlights investor sensitivity to any signs that cloud revenue growth or future cloud bookings may soften, particularly for industry leaders that have been relied upon as bellwethers for enterprise spending on cloud and AI services.
Key data points
- Microsoft: adjusted EPS $4.14 on $81.3 billion in revenue; Azure revenue growth 39% and slightly below the prior quarter's pace.
- SAP: fourth-quarter revenue in line with expectations, but cloud backlog and 2026 cloud revenue outlook missed forecasts.
- Premarket moves for select software names: Datadog -5.5%, Atlassian -4.3%, Workday -3.9%, Snowflake -4.3%, Salesforce -4.6%, MongoDB -3.7%, Adobe -2.6%.
Market context and implications
The immediate market response underscores the role of cloud backlog metrics and forward cloud revenue guidance in shaping expectations for software companies. Even when headline earnings and revenue figures surpass analyst estimates, investors are closely watching growth trajectories in cloud platforms and services that underpin AI deployments and enterprise digital transformation.
Sources and limitations
This report is based on the company results and premarket price moves cited above. Where the original information does not provide additional detail on underlying drivers or company commentary beyond the items stated, this article reflects that limitation rather than inferring further causes.