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:
- Video Conferencing company RingCentral (NYSE: RNG) fell 7.8%. Is now the time to buy RingCentral? Access our full analysis report here, it’s free.
- Video Conferencing company Five9 (NASDAQ: FIVN) fell 7.4%. Is now the time to buy Five9? Access our full analysis report here, it’s free.
- Document Management company DocuSign (NASDAQ: DOCU) fell 7.4%. Is now the time to buy DocuSign? Access our full analysis report here, it’s free.
Zooming In On RingCentral (RNG)
RingCentral’s shares are very volatile and have had 29 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 10 days ago when the stock gained 5.9% as investors moved to buy the dip in high-quality SaaS names that had become significantly oversold amid a fragile market rebound driven by cautious optimism surrounding U.S.-Iran ceasefire talks.
While the Dow Jones Industrial Average retreated under the weight of a spike in oil prices and the naval blockade of the Strait of Hormuz, traders hunted for value in software leaders. Market participants increasingly decoupled cloud-native business models from the physical logistical nightmares and soaring fuel costs straining the broader economy. This "buy the dip" conviction was further catalyzed by high-profile analyst support for sector leaders like ServiceNow. Bernstein reiterated an "Outperform" rating, framing the company as a foundational AI agent platform with an impenetrable moat in business process automation.
RingCentral is up 38.7% since the beginning of the year, and at $38.27 per share, it is trading close to its 52-week high of $42.02 from March 2026. Despite the year-to-date gain, investors who bought $1,000 worth of RingCentral’s shares 5 years ago would now be looking at only $118.65.
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