By Jared Mitovich

A wave of blockbuster earnings in tech is catching a couple software companies, too.

Shares in Datadog jumped 31% on Thursday after the company reported 32% year-over-year revenue growth. Cybersecurity provider Fortinet added 20%, after it said it was seeing higher demand for its offerings because of artificial intelligence. A mix of other software-oriented companies -- among them PTC, Workday, and MongoDB -- all gained at least 6%.

The moves underscore investors' enthusiastic response to the winners of earnings season, which has been among the best in recent memory. Of the S&P 500 constituents that have reported so far, roughly 85% have beaten estimates -- not just the hyperscalers and heavyweights -- according to FactSet.

On a day when the S&P 500 and Nasdaq composite retreated slightly from records hit on Wednesday, earnings drove some outsize moves. Strong results from software and cybersecurity businesses buoyed the tech-heavy Nasdaq composite, which closed down 0.1%. The S&P 500 index lost 0.4%, and the Dow Jones Industrial Average closed 0.6%, or 314 points lower.

"We've identified a halo effect in earnings where Magnificent Seven have led and the rest of the market in the S&P 500" are now following with their own strong performance, said Julia Hermann, global market strategist at New York Life Investment Management.

Datadog is one example. Customers are hiring the company to act as their watchdog for how AI-enabled infrastructure is performing and whether there are any new security vulnerabilities. Among its clients are the world's newest $1 trillion business -- Samsung -- as well as a company that Datadog's CEO has called "one of the largest AI foundational model companies."

On the other end was Shake Shack, shares of which plummeted 28% after the burger chain reported disappointing quarterly results and growing beef costs.

Planet Fitness stock slid 31% after the gym paused the rollout of price increases, and appliance maker Whirlpool tumbled 12% after it said the war has crushed its profit. Other declines in the S&P 500 were led by the energy, industrials, and materials sectors.

Moves on earnings masked a relatively calm day in other corners of the market. Benchmark crude oil futures retreated as investors waited for Iran's response to a proposal from the U.S. to resolve the war. Futures for Brent crude, the international benchmark, slipped 1.2% to $100.06 a barrel.

The U.S. is also considering resuming an operation to guide ships through the Strait of Hormuz, which could help unlock oil supply. Still, the monthslong shutdown of the key shipping lane has yet to fully ripple through the global economy.

"The confidence interval on oil is a mile wide right now," Hermann said.

The stock market, despite declines Thursday, has held on to a more optimistic view of peace in the Middle East. That has allowed many investors to refocus on earnings and pick the winners and losers of the AI boom . Investors will take a fresh look at the economy's strength when the Labor Department reports job figures on Friday morning.

While the semiconductor sector has been the darling of AI-fueled financial markets, there are signs that some stocks are getting overextended, said James Ragan, co-chief investment officer at D.A. Davidson.

After a blistering rise since April, the PHLX semiconductor index pulled back 2.7% on Thursday, while the State Street SPDR S&P Software & Services ETF -- which tracks an equal-weight benchmark of about 140 software companies -- reached its highest trading price since Feb. 2, when a $1.6 trillion selloff was pummeling the sector.

"One of the comments we've been making is, 'Stay in the market, let it ride a little bit, but rebalance to mitigate the risk,'" Ragan said. "That could mean trimming some of the semiconductor names and adding to the software names."

Write to Jared Mitovich at jared.mitovich@wsj.com

(END) Dow Jones Newswires

May 07, 2026 16:56 ET (20:56 GMT)

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