Software stocks sink, led by declines from Figma, Datadog

Software stocks sink, led by declines from Figma, Datadog

Ines Ferré · Senior Business Reporter

Thu, August 6, 2026 at 5:41 PM GMT+3 1 min read

What happened: Software stocks declined on Thursday as shares of Datadog (DDOG), Figma (FIG), and HubSpot (HUBS) plummeted more than 15% following their quarterly results.

Shares of software peers Salesforce (CRM) and ServiceNow (NOW ) also dropped, along with Workday (WDY) and Cloudflare (NET).

What's behind the move: The software sector has been attempting a rebound since April lows as investors worry that AI will disrupt industry business models. They are therefore viewing earnings with high scrutiny. Datadog's quarterly results beat on the top and bottom line, but the company's adjusted gross margin of 80% came in slightly below the analysts' consensus estimate of 80.7%.

Meanwhile, Figma's quarterly results also beat on the top and bottom lines, but the software design and collaboration company flagged rising AI inference spending, or the ongoing cost of running user prompts through AI models.

"We do not charge our customers for their usage of products that are currently in beta, and we bear the cost of inference without offsetting consumption revenue," Figma CFO Praveer Melwani said during the company's earnings call. "As a result, gross margin will vary from quarter-to-quarter in the near term."

(DDOG )

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DDOG FIG HUBS

What else you need to know: Software stocks have had a rough year, with the sector sinking in the first quarter of this year over AI concerns.

Software companies have been highlighting how AI will help their business models as they aggressively incorporate the technology into their offerings.

The iShares Expanded Tech-Software Sector ETF (IGV) fell more than 2% on Thursday. The sector has rebounded over 35% from its April low but remains down 3% year to date.

Ines Ferre is a senior business reporter for Yahoo Finance. Follow her on X at @ines_ferre.

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