Overview
- Shares of Datadog, Figma and HubSpot plunged more than 15% after their quarterly reports, triggering a broad sell-off in software names on Thursday.
- Datadog beat revenue and earnings but reported an adjusted gross margin of 80%, below the 80.7% analysts expected, which alarmed traders.
- Figma also beat estimates but warned that rising AI inference spending is weighing on gross margins because the company currently pays compute costs for beta features instead of charging customers.
- Other firms with AI exposure fared very differently: Palantir jumped about 30% after reporting strong revenue growth and Cloudflare and JFrog posted gains on positive results.
- The split performance has left the software sector volatile and more selective, with investors now focused on how companies will monetize AI usage, manage recurring inference costs, and whether they will adopt consumption-based pricing to protect margins.