What Happened?
A number of stocks fell in the afternoon session after the April PPI report sent Treasury yields to 10-month highs, with the 10-year yield rising to 4.49%.
This 'sticky and accelerating' inflation data effectively eliminated 2026 rate-cut hopes, raising the discount rate applied to long-duration growth earnings. BNN Bloomberg noted technology-related inflation was emerging as a structural concern, with computer software prices up year-over-year, potentially triggering a pullback in enterprise software spending.
Software companies sell long-duration subscription revenue, recurring contracts whose value is heavily weighted toward future earnings. When Treasury yields rise, the discount rate investors apply to those future cash flows rises with them, which mechanically reduces the present value of the business and compresses the price-to-earnings multiple.
Beyond the rate channel, the PPI print confirmed that software-specific inflation was running well above the headline rate. This 'sticky' pricing power for vendors is a double-edged sword: while it supports current revenue, it risks forcing enterprise customers to consolidate seats or delay new deployments to protect their own margins in a negative real-wage environment.
The stock market overreacts to news, and big price drops can present good opportunities to buy high-quality stocks.
Among others, the following stocks were impacted:
- Vertical Software company Guidewire Software (NYSE: GWRE) fell 4.6%. Is now the time to buy Guidewire Software? Access our full analysis report here, it’s free.
- HR Software company Paylocity (NASDAQ: PCTY) fell 4.5%. Is now the time to buy Paylocity? Access our full analysis report here, it’s free.
- Finance and Accounting Software company BILL (NYSE: BILL) fell 3.5%. Is now the time to buy BILL? Access our full analysis report here, it’s free.
- Developer Operations company GitLab (NASDAQ: GTLB) fell 3.5%. Is now the time to buy GitLab? Access our full analysis report here, it’s free.
- Customer Experience Software company Sprinklr (NYSE: CXM) fell 4.1%. Is now the time to buy Sprinklr? Access our full analysis report here, it’s free.
Zooming In On Guidewire Software (GWRE)
Guidewire Software’s shares are very volatile and have had 20 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 28 days ago when the stock gained 6.8% on the news that software stocks benefited from a "risk-on" market sentiment fueled by potential peace negotiations between the U.S. and Iran.
As geopolitical tensions eased, investors returned to growth-heavy favorites like Microsoft and ServiceNow, which offer high-margin subscription revenue and clearer paths for integrating generative AI into enterprise workflows.
Guidewire Software is down 32.9% since the beginning of the year, and at $125.92 per share, it is trading 51.9% below its 52-week high of $261.88 from September 2025. Despite the year-to-date decline, investors who bought $1,000 worth of Guidewire Software’s shares 5 years ago would now be looking at an investment worth $1,352.
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