What Happened?
Shares of digital advertising platform The Trade Desk (NASDAQ: TTD) fell 3.6% in the afternoon session after IBM issued a second-quarter earnings warning, suggesting that enterprise customers may be slashing software budgets to fund hardware purchases.
Legacy workflow and application incumbents like ServiceNow (NYSE: NOW), Workday (NASDAQ: WDAY), and Salesforce (NYSE: CRM) fell alongside IBM. Conversely, cybersecurity platforms including CrowdStrike (NASDAQ: CRWD), Okta (NASDAQ: OKTA), and Zscaler (NASDAQ: ZS) rallied. This price action highlights a sharp divergence in how the market treats different software categories under macroeconomic pressure. IBM pre-announced adjusted earnings of $2.93 per share on $17.2 billion in revenue, missing Wall Street estimates of $3.01 and $17.86 billion, respectively. In a letter to investors, CEO Arvind Krishna revealed that the shortfall was driven by a sudden reprioritization of enterprise budgets in late June. Clients shifted their capital expenditure toward servers, storage, and memory chips to secure supply-constrained hardware ahead of expected price increases, causing "numerous large deals" to stall.
The IBM pre-announcement provides evidence for a fear that pressured software multiples all year: the massive capital required to build out artificial intelligence hardware appears to be cannibalizing traditional IT budgets. When chief information officers are forced to choose between securing scarce memory chips or signing new enterprise workflow contracts, the update suggests hardware might be winning. Because IBM's broad exposure gives it a comprehensive view of enterprise wallets, its warning suggests a headwind for the broader software-as-a-service sector.
The shares closed the day at $18.93, down 4.4% from the previous close.
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What Is The Market Telling Us
The Trade Desk’s shares are extremely volatile and have had 30 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 13 days ago when the stock gained 5.7% on the news that Guggenheim's John DiFucci upgraded both Salesforce and ServiceNow to Buy, arguing the AI-disruption fear that gutted the sector during the year had pushed valuations too low.
This was a valuation call from a skeptic, not an AI endorsement. DiFucci wrote he is "not upgrading because we see [ServiceNow] as an AI beneficiary," calling near-term AI monetization "unlikely to materialize" and AI risks "very real," while arguing the darkest scenario was already priced in (CRM at ~3.7x EV/recurring revenue; NOW's $125 target at 7.5x EV/NTM recurring revenue).
The read-through was what lifted the group. When a previously cautious, highly ranked analyst flips to Buy on the two enterprise-SaaS bellwethers purely on valuation, it signals the "SaaSpocalypse" repricing overshot, de-risking the whole complex and inviting bargain-hunting across peers. Oracle's ~2% bounce added an independent second leg, driven by inclusion on William Blair's July Analyst Conviction List, a new AI product, and oversold conditions after the previous disclosure of a $40 billion AI-infrastructure raise. Together they extended a multi-week recovery.
The Trade Desk is down 49.7% since the beginning of the year, and at $18.94 per share, it is trading 78.9% below its 52-week high of $89.76 from August 2025. Investors who bought $1,000 worth of The Trade Desk’s shares 5 years ago would now be looking at only $257.20.
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