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:
- Payments Software company Marqeta (NASDAQ: MQ) fell 3.5%. Is now the time to buy Marqeta? Access our full analysis report here, it’s free.
- Hospitality & Restaurant Software company Toast (NYSE: TOST) fell 3.4%. Is now the time to buy Toast? Access our full analysis report here, it’s free.
- Design Software company Dolby Laboratories (NYSE: DLB) fell 2.9%. Is now the time to buy Dolby Laboratories? Access our full analysis report here, it’s free.
- Tax Software company Intuit (NASDAQ: INTU) fell 4%. Is now the time to buy Intuit? Access our full analysis report here, it’s free.
- E-commerce Software company GoDaddy (NYSE: GDDY) fell 3.5%. Is now the time to buy GoDaddy? Access our full analysis report here, it’s free.
Zooming In On Intuit (INTU)
Intuit’s shares are quite volatile and have had 17 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 20 days ago when the stock dropped 7.9% on the news that quarterly results from two major companies raised fresh questions about AI's impact on the sector. IBM declined about 10% after reporting slower Q1 revenue growth, with weakness in its software business.
ServiceNow also fell after noting that delayed deals in the Middle East, tied to the Iran conflict, would affect its subscription revenue growth. NOW also expects recent investments in AI to weigh on margins in the near term. The sector-wide move reflected an ongoing debate.
Some investors have questioned whether AI tools will reduce demand for traditional software or change existing license models. The results were likely read through that lens, which contributed to selling across software names beyond the two companies that reported. Though neither cause was strictly about AI suggesting the contagion was thematic not fundamental. Also, given ServiceNow was viewed as AI-resilient, its miss weakened the "safe SaaS" case, causing some analysts to lower their estimates.
Intuit is down 40.1% since the beginning of the year, and at $377.04 per share, it is trading 53.3% below its 52-week high of $807.39 from July 2025. Investors who bought $1,000 worth of Intuit’s shares 5 years ago would now be looking at only $934.38.
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