A crush of workers sent home earlier this year turned out to be good for a lot of tech companies. Keeping them home might not be.
That was the message Monday from SAP. The German enterprise-software giant lowered its revenue and profit targets for the full year and adjusted what it calls its “midterm ambition,” projecting lower cloud revenue through 2025 in part due to “investment delays” in several industries grappling with the coronavirus pandemic’s duration.
That was enough to take SAP’s shares down 22% Monday—their worst single-day drop in decades. It also weighed on tech stocks that, like SAP, have a large mix of older legacy businesses. Oracle , VMware , Dell, International Business Machines and Hewlett Packard Enterprise were among the hardest hit. But hotter cloud names weren’t spared either. The BVP Nasdaq Emerging Cloud Index fell more than 2% in morning trading. Even Snowflake , still twice last month’s offering price, was down 6% at one point.
SAP’s woes aren’t necessarily universal. For example, the European software giant is heavily exposed to the drop in business travel through its Concur expense-accounting and travel-booking platform. But the company also noted on Monday’s conference call that a lot of businesses are cutting back on their spending as the pandemic rages on. Thus, SAP says “it is prudent to assume a more gradual recovery” relative to earlier expectations that business would recover in the latter half of this year.
Many software stocks, particularly those in the hot cloud category, have largely been trading as if business has never been better. But slumping demand for corporate tech affects them all. Following their quarterly survey of chief information officers, Morgan Stanley analysts earlier this month warned that even “high priority” projects related to digital transformation will see some impact as executives still expect a decline in their tech budgets this year.