By Angela Palumbo

ServiceNow was the second enterprise software company to give better-than-expected guidance this week, helping to boost shares of its peers and making the sector appear to be a potential safe port in a stormy market.

The company reported better-than-expected first-quarter earnings after the stock market closed on Wednesday. Management's forecast for subscription revenue was more optimistic than expected, giving investors confidence that the company can weather potential cuts in business spending, or a recession, fueled by President Donald Trump's tariffs.

Shares were up 15% to $931.25 on Thursday afternoon, putting them on pace for their largest percentage increase since April 25, 2013, according to Dow Jones Market Data. The stock was the best performer in the S&P 500.

"Solid execution and demand for ServiceNow's workflow automation platform is providing a meaningful offset to an otherwise challenging macro" environment, BofA Securities analyst Brad Sills wrote on Wednesday night. He increased his target for the stock price to $1,085 from $1,025 while continuing to rate the shares at Buy.

The German software company SAP, which reported its results on Tuesday, also gave better-than-expected guidance. CFO Dominik Asam told Barron's that SAP is "in a bucket of business which is not yet affected by these tariffs, so we have been sticking to what is really visible and hard data as opposed to speculating about how this can evolve."

Software stocks rose on Thursday. Salesforce was up 4.8%, Adobe climbed 1.9%, and both Intuit and Microsoft were up 2.5%.

But software stocks' apparent resilience doesn't mean there aren't risks ahead.

"Our field checks suggest that the environment for closing enterprise deals is indeed becoming more difficult, particularly for larger commitments from enterprise customers concerned about tariff impacts and demand uncertainties," Macquarie analyst Steve Koeing wrote on Thursday. "If policy uncertainties remain elevated, we're skeptical that 1Q momentum in the software space can be maintained."

More software companies are scheduled to report their financial results in the days ahead. As these earnings roll out, and more updates on tariffs come, investors will get a better sense of whether the space truly is a safe place.

Write to Angela Palumbo at angela.palumbo@dowjones.com

This content was created by Barron's, which is operated by Dow Jones & Co. Barron's is published independently from Dow Jones Newswires and The Wall Street Journal.

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April 24, 2025 13:40 ET (17:40 GMT)

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