This quarter was always going to be a pivotal one for stocks, amid geopolitical upheaval—and so far, it’s delivering: Roughly 85% of S&P 500 companies have beaten expectations thus far.

But beneath that headline strength, investors are zeroing in on the parts of the market where the real tension is playing out. Yesterday, we looked at how the Iran conflict and rising oil prices are weighing on consumer companies. Today, the market’s attention shifted to another pressure point: software companies.

Software goes hard

Since the beginning of the year, the industry has been haunted by “SaaSpocalypse” fears—the idea that advanced AI agents could replace tasks traditionally done by enterprise software companies. But this week’s earnings suggest something more nuanced.

Take Datadog: The cloud security platform just delivered blowout results, with revenue topping $1 billion for the first time, and signed two major hyperscaler customers tied to training next-generation AI systems. Shares surged 30% yesterday, marking their biggest one-day gain since going public, and rose another 6.12% today.

Cybersecurity firm Fortinet told a similar story, posting a revenue beat driven by a 41% sales surge in its product segment. Notably, it saw a 31% jump in billings, its strongest growth in over three years. Looking ahead, management bumped up full-year guidance on rising cybersecurity threats, sending shares up 24% yesterday, and another 5.65% today.

But they can’t all be winners. Customer relationship management (CRM) platform HubSpot reported mixed results after the bell yesterday: While it beat on both revenue and earnings, second-quarter revenue guidance came in below expectations. Shares tumbled 19.05% this afternoon.

Adapt or die

The divergence across software names is telling, and it comes down to how each company is navigating the AI shift.

For Datadog, those hyperscaler deals are an early sign that AI may be additive, not disruptive. TD Securities analyst Andrew Sherman even called it a “must-own stock.” Meanwhile, Fortinet is riding a different side of the same wave: As AI systems scale, so do security risks, driving more demand for cybersecurity tools.

HubSpot, on the other hand, picked up multiple downgrades from William Blair, Cantor Fitzgerald, and Bank of America, as concerns mount around its AI transition. The company is shifting from selling traditional CRM tools to pushing AI agents that can run marketing and sales tasks—but while the move makes sense in the long run, BofA analysts say it introduces execution risks in the near term, which could weigh on sentiment until the model proves itself over the next few quarters.

Although HubSpot sold off today, it doesn't necessarily signal a return of the broader AI disruption fears. The entire software industry is slowly adapting to the AI shift—what investors need to pay attention to is where each company is in that transition, and how well they execute.—SY

🟢 What’s up

• Intel popped 13.93% after the tech company reportedly agreed to produce chips for Apple products.
• Fluence Energy surged 27.36% after EBITDA beat expectations and the energy storage company got upgrades from both HSBC and Roth Capital.
• Akamai Technologies jumped 26.58% after a $1.8 billion AI cloud deal and a first-quarter earnings beat.
• Texas Roadhouse gained 12.33% after topping EPS estimates and posting 6.5% same-store sales growth.
• Rocket Lab soared 34.32% as revenue beat expectations, backlog hit a record, and new contracts and acquisitions boosted growth outlook.
• Monster Beverage climbed 13.61% after beating profit and revenue estimates, driven by strong international sales.
• Data engineering company Innodata skyrocketed 85.91% after reporting a blowout quarter, with revenue up 54% year over year.

What’s down

• CoreWeave dropped 11.4% as a light second-quarter outlook and high expenses overshadowed a revenue beat.
• AppLovin fell 6.08% as investors took profits following a sharp post-earnings rally.
• Upwork declined 16.87% after announcing a restructuring that includes cutting 24% of its workforce.
• Expedia tumbled 9.02% as weak guidance tied to geopolitical tensions and softer travel demand weighed on sentiment.
• Toast dropped 14.74% as weaker-than-expected EBITDA guidance offset an earnings beat.
• Cloudflare slid 23.62% after unveiling plans to cut about 20% of staff, also issuing a cautious sales outlook.

Americans are freaking over $5-per-gallon gas and AI gobbling up jobs, but at least the latest job report looks okay (if you squint—from a distance).

The Bureau of Labor Statistics tallied up 115,000 new jobs in April, nearly double the expected 65,000, while unemployment remained steady at 4.3%. Still, if you zoom into who’s getting hired, these chipper headline numbers start to crack.

An estimated 53,900 job gains were in health care and social assistance—which makes sense, with over 11,000 baby boomers turning 65 every day. Transportation and warehousing chipped in 52,100 jobs, thanks to the lazy throngs ordering delivery rather than schlepping to the store. Other occupations racking up roles include retail (21,800 jobs), leisure (14,000 jobs) and hospitality (10,000 jobs). The rub? These sectors hire in spurts that may not stick; leisure and hospitality are often the first to crater once consumers start feeling queasy about splurgy vacations.

The job market’s biggest losers: With layoffs rampant in tech, it’s no surprise that the information sector lost 13,000 jobs, followed by financial (11,000 jobs), and government (8,000 jobs). More bad news in the fine print: Payroll figures for February and March got revised down with a combined 16,000 fewer jobs than previously reported. Plus, average hourly wages inched up 3.6% annually—lower than expected, but above inflation’s 3.3%…for now.

And just to pile on more crappy news to top off this fine Friday, some companies have started rolling back a bunch of beloved benefits, including 401(k) matches, parental leave, and (god forbid) PTO. Time to schedule your summer break before it’s gone.—JD

What was supposed to be a dream vacation turned into a nightmare for the roughly 150 passengers aboard the Hondius, a Dutch cruise ship that has become the hub of a deadly hantavirus outbreak.

Three deaths, and eight cases overall, have been reported on the ship, according to the World Health Organization. Health authorities are acting quickly to trace and contain the outbreak, tracking down passengers who have already disembarked.

As early headlines about the disease unfold in real time, investors are assessing the market implications. So far, the outbreak has triggered short-term speculative moves, but investors don’t view it as the same sort of broad threat that Covid-19 was.

A shot to the arm

Moderna jumped about 10% yesterday morning on the news that the company is developing a vaccine for hantavirus—work which had begun before the outbreak. But by the end of the day, the stock had pared its gains, thanks to an Evercore note that dampened investor enthusiasm.

“We see no meaningful revenue opportunity,” Evercore analysts wrote. The reason, they explained, is because hantavirus is a “structurally small market” and Moderna’s vaccine for the disease is in an early stage.

Moderna popped 11.97% again today, creating yet more whiplash. But the surge is also related to the company announcing a positive Phase 3 study related to its seasonal flu vaccine in development, which isn’t related to its hantavirus research.

Cruise stocks are sinking

The hit to cruise stocks, however, may be longer lasting, given that the international news isn’t exactly great PR for sea adventures.

Royal Caribbean ended the day down 2.06%, Carnival fell 2.3%, Norwegian Cruise Line Holdings dipped 0.81%, and Viking Holdings declined 1.62%.

The hantavirus outbreak comes in an already rough year for the cruise industry, which has been battered by surging fuel prices and lower demand during the Iran war, since geopolitical chaos doesn’t exactly inspire more international travel.

The market shrugs it off

Perhaps what’s most surprising is the extent to which the broader market hasn’t interpreted the outbreak as a systemic risk. In March 2020, the Dow crashed about 26% in just four days as investors went from wary to full panic-mode.

But experts emphasize that while the situation is still unfolding, there’s no reason to sound the alarm bells. “This is not the start of a Covid pandemic,” said Dr. Maria Van Kerkhove, an infectious disease expert, at a WHO press conference.

The market agrees, for now.—LB

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• Famed Big Short investor Michael Burry says today’s market feels like “the last months of the 1999-2000 bubble.”
• Turns out the White House is pretty good at investing: Here’s how its portfolio is faring compared to the rest of the market.
• Opaque quant firm Jane Street just announced $16.1 billion in trading revenue, a fresh record and more than double what it made in Q1 of last year.
• Remember Lime, the e-scooter company? It just filed for an IPO.
• Take a look at the red-hot ETF that just raised $1 billion in a single day.

Monday: Constellation Energy, Barrick Mining, Compass, AST SpaceMobile, Circle Internet Group, Hims & Hers Health, Plug Power, and of course, Monday.com lead off a new week of earnings. The report of the day is US existing home sales for April, and the US Senate is scheduled to vote on Kevin Warsh’s nomination as Fed Chair.

Tuesday: Siemens Energy, Bayer, Vodafone, Venture Global, On Holding, Under Armour, eToro, and Oklo are the earnings to watch. There’s a few economic reports, including the NFIB small business optimism reading, but the real highlight is the April CPI report, which is sure to catch a lot of the market’s attention as Jerome Powell hands the baton off to Kevin Warsh.

Wednesday: The April PPI report keeps the spotlight on inflation, while over in earnings land we’ve got Tencent, Cisco, Alibaba, Siemens, SoftBank, USA Rare Earth, StubHub, WeRide, and Birkenstock.

Thursday: A full day of reports, including those for US April retail sales, the import price index, the export price index, March business inventories, and the usual weekly initial jobless claims. Earnings are slowing down a bit, but Applied Materials, National Grid, Figma, Intuitive Machines, Viking Holdings, and Yeti are all worth watching.

Friday: Earnings are few and far between to wrap up the week. As for economic reports, keep an eye on the May Empire State manufacturing index, as well as the April industrial production and capacity utilization report. And finally, Jerome Powell’s term as Fed Chair comes to a conclusion.