Key Highlights

● ServiceNow and Fortinet both plunged in extended trading.

● ServiceNow's AI target and guidance underwhelmed investors.

● Fortinet faced conflicting accounts of a margin shortfall.

● Other software names also fell in sympathy.

Software investors got a rough evening, as ServiceNow and Fortinet both plunged in extended trading after their quarterly reports, landing a blow to a corner of tech that has struggled to keep pace with the AI hardware boom. Reports differed on the size of each drop, but both moves were severe for companies of their size.

ServiceNow, which sells workflow automation software to large companies, tumbled after the bell, with adjusted earnings missing estimates by a narrow margin, according to one market newsletter, while fourth-quarter guidance and an AI target underwhelmed investors.

Fortinet's Double Hit

Fortinet, the network security company, had a tough day even before its report, sliding during the regular session and then plunging further in extended trading. Accounts of the results differed, with one source saying gross margin fell short of expectations, while another said results were solid and that the company raised its guidance.

Either way, the market's verdict was harsh, coming on top of the regular-session decline, as Fortinet is a major index member, and its slide came as index futures were already under pressure from Alphabet's after-hours drop.

A Broader Software Chill

The after-hours selloff capped a difficult session for parts of software and networking, with F5 tumbling in regular trading after a weak outlook and a downgrade, and CoStar Group also sinking despite raising its full-year guidance.

There were exceptions, with Gen Digital rising in extended trading after raising its full-year outlook, and Microsoft climbing after the bell on a beat driven by faster cloud growth, showing investors spent the evening sorting carefully between companies.