CRM, NOW, INTU, ADBE: Software Stocks Slide After Figma Flags Surging AI Costs

Figma has been investing heavily in AI functionality across its products, which increased R&D and operating expenses two times in the last quarter.

• FIG stock dropped 16% with rival ADBE declining 1.8%.
• Software shares fell, led by the decline in Salesforce.
• Retail sentiment was ‘bearish’ for CRM, INTU, ADBE, and ADBE, while the sentiment for FIG turned ‘extremely bullish’ from ‘neutral.’

Software stocks including Adobe and Salesforce declined late Wednesday after Figma’s latest quarterly results showed that spending on new AI features was pressuring profits.

Shares of Adobe, Figma’s closest rival, declined 1.8% in the overnight session. Salesforce stock declined 4.7%, while ServiceNow and Intuit declined 3.2% and 2.7% respectively.

Software shares have surged in recent weeks as investors rotated capital back into the sector, which had remained under pressure for most of the year. 

Figma’s shares plunged over 16% on its profit warning, despite posting quarterly sales above expectations and raising the full-year forecast.

Figma’s Q2 Update

Figma has made AI a central part of its product strategy, integrating the technology across its platform to drive user growth and engagement. 

Those investments helped lift June-quarter revenue 48% to $370.1 million, topping analysts’ estimates of $351.6 million from LSEG/Reuters. 

But the AI push also drove a sharp increase in spending, with research and development expenses more than doubling and total operating expenses rising to $426.9 million, nearly twice as much as in the same quarter last year.

"While ⁠we're seeing really strong momentum on the revenue side, we want to make sure that we're really investing on the new product side to ensure we can create durable modes of growth over the long term," Figma CFO ​Praveer Melwani told Reuters.

Figma now expects full-year ​revenue between $1.463 billion and $1.467 billion, up from its prior forecast of $1.422 billion to $1.428 billion, and ahead of ​analysts' estimates of $1.44 billion.

Recent Catalysts In SAAS

Truist downgraded Intuit to ‘Hold’ from ‘Buy’ and reduced the price target to $350 from $410 on Monday. The firm cited the company's softening growth outlook and lack of near-term share catalysts for the downgrade. 

Intuit's commentary indicates its growth rate "could reflect a J-curve in the year ahead," Truist said in an analyst note.

Erste Group upgraded Salesforce to ‘Buy’ from ‘Hold’ on Wednesday, just after the enterprise CRM company announced a new contract win from the U.S. Army Human Resources Command.

Salesforce on Wednesday said it promoted insider Miguel Milano as chief operating officer, while Robin Washington continues in her role as president and chief operating and financial officer.

Meanwhile, Goldman Sachs removed ServiceNow from its U.S. Conviction List as part of its monthly update earlier this week while keeping a ‘Buy’ rating on the shares.

On Stocktwits, retail sentiment was ‘bearish’ for CRM, INTU, ADBE, and ADBE. The sentiment for FIG turned ‘extremely bullish’ from ‘neutral,’ with several traders expecting the stock to bounce back in due course.

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