The market is rewarding software stocks for reporting earnings again.
May 8, 2026
Thursday gave us another busy earnings tape, and the biggest takeaway was the market's renewed appetite for software stocks.
This appears to be the early stages of a significant rotation, and Sam nailed it yesterday with The Chart of the Day.
The S&P 500 slipped 31 basis points, mostly digesting the prior day’s big move, but underneath the surface, earnings reactions were loud.
We got 33 new reactions from S&P 500 components, and the overall tone was pretty damn good.
Looking at the Top Beats Sheet, Datadog $DDOG was the biggest winner, as it exploded more than 31% following a big double beat.
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PTC Inc. $PTC, another software name that has been a hot mess for a while, posted its best earnings reaction since April 2022.
Even AppLovin $APP, which technically operates in the advertising agency space but trades more like a high-growth software stock, bounced back after last quarter’s ugly breakdown and avoided a second straight negative earnings reaction.
This change in earnings sentiment matters because software has been one of the weakest areas of the market for a while.
Semiconductors have been the home of leadership.
Meanwhile, software has been where good stories go to die.
But not anymore...
Now, let's take a closer look at Fortinet $FTNT, the software stock that stood out most to us.
This $79 billion cybersecurity stock reported a top- and bottom-line beat and ripped 20% for its fourth-best earnings reaction ever.
Thursday's move in Fortinet filled a massive volume pocket in one session.
After cratering last summer, FTNT spent months repairing the damage and building a tactical base, and yesterday it launched back toward the old highs.
Now it is sitting right at a major shelf of former resistance.
Could it pause here? Absolutely.
After a 20% earnings gap, some digestion would be perfectly normal.
But the bigger message is that buyers are back in control, and if FTNT can work through this overhead supply, a fresh leg toward new all-time highs is on the table.
What's more, the fundamentals explain why the stock had so much firepower.
Fortinet reported 20% YoY revenue growth, driven by 41% YoY growth in product revenue.
The company also posted a record free cash flow of more than $1 billion and raised its full-year 2026 revenue guidance.
Overall, this was a monster quarter for one of the world's largest software stocks.
If FTNT can break above 109, we believe it's likely to make a run for new all-time highs and enter a brand-new primary uptrend.
Now, the Bottom Beats sheet was not nearly as friendly.
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Zoetis $ZTS was the biggest disaster of the day, falling 21.5% after missing both revenue and EPS expectations.
Tapestry $TPR also got smoked despite a double beat.
Even energy stocks, including APA Corp. $APA and Texas Pacific Land $TPL, were punished for reporting good news.
There were plenty of bad reactions, but ZTS was the one that mattered most.
And that's because this was a complete breakdown.
ZTS fell more than 21% for its worst earnings reaction ever, its seventh consecutive negative earnings reaction, and its lowest close since 2019.
Since peaking in late 2021, Zoetis has been carving out a massive top, and Thursday’s report put the final nail in the coffin.
So long as Zoetis remains below the 2020 low at 90, the path of least resistance is lower for the foreseeable future.
And the fundamentals are driving this technical downtrend...
The real problem with Zoetis right now is that revenues in the U.S. companion animal segment are declining by double digits YoY as pet owners become more price-sensitive.
That is a rough backdrop for a company that has historically been viewed as one of the highest-quality compounders in animal health.
And until we see a significant change in fundamentals, we expect continued negative earnings sentiment and downward pressure on the stock.
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Happy Friday!
-The Beat Team
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