Fortinet and ServiceNow lead a software-stock selloff

Software shares fell sharply in U.S. premarket trading on Thursday after results from Fortinet and ServiceNow fell short of investors’ expectations. The reaction highlighted how demanding the market has become toward established software companies as concerns about artificial-intelligence competition persist.

According to Reuters, Fortinet shares dropped 25% and ServiceNow declined 18.1%. Both companies improved parts of their annual outlooks, but those upgrades were not enough to prevent a broader retreat across the sector.

Fortinet’s raised outlook fails to satisfy

Fortinet beat third-quarter expectations and lifted its earnings and revenue forecasts. Investors nevertheless wanted stronger signals from a company whose shares had gained 119% this year, Reuters reported.

At least five brokerages lowered their price targets, including Piper Sandler, Jefferies and RBC. Scotiabank reduced its target to $140 from $163 and said it wanted clearer evidence that new opportunities could sustain the company’s firewall momentum.

Those opportunities include security for traffic moving within networks as AI agents become more widely used, large firewall contracts tied to AI data centers and operational technology. The brokerage also wants to see stronger enterprise adoption of Fortinet’s SASE and security-operations offerings.

ServiceNow weakness spreads to peers

ServiceNow’s third-quarter profit miss overshadowed increases to its full-year subscription-revenue and cash-flow-margin guidance.

The selling extended to other software and cybersecurity companies. Salesforce fell 4.3%, Palo Alto Networks lost 6%, CrowdStrike declined 5% and Zscaler dropped 5.8%, according to the premarket figures reported by Reuters.

AI disruption remains in focus

The S&P 500 Software & Services Index has risen about 6% so far this year, roughly half the gain in the broader S&P 500. Investors have been examining whether increasingly capable AI models could undermine traditional software business models.

That debate intensified after Google unveiled Gemini 4 Carbon on Wednesday, adding to competition with OpenAI and Anthropic in coding and cybersecurity. The market moves in this report are premarket snapshots, not closing prices.

Source: Reuters.