What Happened?

A number of stocks jumped in the afternoon session after shares of enterprise software and SaaS companies rallied broadly as investors rotated capital out of semiconductor and AI-hardware stocks following calls for an artificial intelligence development slowdown. 

According to Reuters, while chipmakers and hardware providers faced steep sell-offs after leaders from Anthropic and OpenAI urged a pause in frontier AI advancement, software stocks bucked the broader tech trend and climbed higher in early trading. Market participants viewed the potential deceleration in AI infrastructure spending as a catalyst to rotate back into traditional enterprise software names like ServiceNow, Salesforce, and Adobe. 

Investors have increasingly feared that unchecked AI progress could yield autonomous agents capable of bypassing traditional software interfaces entirely. A development freeze limits that threat. It also gives incumbent platforms breathing room to package AI as a feature within their own ecosystems, preserving their recurring revenue without the immediate risk of frontier models rendering their core software obsolete. 

Broadly, these SaaS companies are perceived as less vulnerable to a sudden halt in hyperscaler capital expenditures; instead, they offer steady recurring revenue streams and are positioned to benefit from a more deliberate, measured integration of existing AI tools into corporate workflows rather than a frantic, capital-intensive race for raw compute power.

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:

• Sales Software company HubSpot (NYSE: HUBS) jumped 9.2%. Is now the time to buy HubSpot? Access our full analysis report here, it’s free.
• Automation Software company ServiceNow (NYSE: NOW) jumped 6.5%. Is now the time to buy ServiceNow? Access our full analysis report here, it’s free.
• Identity Management company Okta (NASDAQ: OKTA) jumped 10.9%. Is now the time to buy Okta? Access our full analysis report here, it’s free.
• Finance and Accounting Software company Workday (NASDAQ: WDAY) jumped 4.9%. Is now the time to buy Workday? Access our full analysis report here, it’s free.
• Network Security company Zscaler (NASDAQ: ZS) jumped 14.9%. Is now the time to buy Zscaler? Access our full analysis report here, it’s free.

Zooming In On Zscaler (ZS)

Zscaler’s shares are extremely volatile and have had 31 moves greater than 5% over the last year. But moves this big are rare even for Zscaler and indicate this news significantly impacted the market’s perception of the business.

The previous big move we wrote about was 10 days ago when the stock dropped 4.4% on the news that the company reported second-quarter results that beat expectations, though conservative guidance for net-new annual recurring revenue weighed on sentiment. Sales, operating profit, and earnings per share exceeded Wall Street's expectations, according to the company's press release. The company reported revenue of $898.2 million vs analyst estimates of $877.2 million (24.9% year-on-year growth, 2.4% beat). Adjusted EPS was $1.19 vs analyst estimates of $1.09 (9.2% beat). Adjusted Operating Income clocked in at $218.4 million vs analyst estimates of $207.4 million (24.3% margin, 5.3% beat). Sales and EPS guidance for the next quarter also came in ahead of consensus. Alongside the results, Zscaler announced a restructuring plan to reduce headcount by approximately 3%. On the earnings call, Chief Financial Officer Kevin Rubin said the cut reallocates resources toward artificial intelligence and growth initiatives. He noted that two sales leaders (a geo leader and a vertical leader) departed the previous quarter, adding that the transition will play out in the first half of fiscal 2027 and is reflected in guidance. Rubin factored this sales turnover, along with the uptake pace for the integrated SecOps solution, into the net-new ARR outlook, even after net-new ARR excluding Red Canary grew 17% in the quarter. Furthermore, he said the company pulled forward data-center purchases and that higher memory prices should keep capital spending elevated in fiscal 2027.

Zscaler is down 14.3% since the beginning of the year, and at $188.94 per share, it is trading 43.8% below its 52-week high of $336.27 from November 2025. Investors who bought $1,000 worth of Zscaler’s shares 5 years ago would now be looking at only $685.10.

WHILE YOU’RE HERE: The Next Palantir? One satellite company captures images of every point on Earth. Every single day. The Pentagon wants it. Hedge funds are using it to beat earnings. You’ve probably never heard of it.

This is what the early days of Palantir looked like before it became a giant. Same playbook. Different technology. If you missed Palantir, you need to see this. Claim The Stock Ticker for Free HERE.