The software rout that kicked off last week turned into a goldmine for short sellers who've been betting against tech's highest flyers. Data from S3 Partners shows that bears have raked in roughly $24 billion in paper profits year-to-date (YTD) as software stocks have cratered from lofty valuations. While the sector has lost $1 trillion in market value, short sellers are laughing all the way to the bank. www.barchart.com Oracle (ORCL) is the poster child for this reversal, shedding about 54% from its Sep ...

Core Insights - BlackLine, Inc. reported strong financial results for Q4 and full year 2025, highlighting record bookings and a successful strategic transformation initiated over two years ago [2][6]. Financial Highlights Fourth Quarter 2025 - Total GAAP revenues reached $183.2 million, marking an 8.1% increase from Q4 2024 [6]. - GAAP operating margin remained stable at 3.7%, while non-GAAP operating margin improved to 24.7% from 18.1% in Q4 2024 [6]. - GAAP net income attributable to BlackLine was $4.9 million, or $0.08 per diluted share, a decrease from $56.4 million, or $0.79 per diluted share in Q4 2024 [6]. - Non-GAAP net income attributable to BlackLine was $45.2 million, or $0.63 per diluted share, up from $34.6 million, or $0.47 per diluted share in Q4 2024 [6]. - Billings increased by 9.5% to $226.9 million compared to Q4 2024 [6]. - Remaining performance obligation rose by 23.5% to $1.1 billion [6]. - Operating cash flow was $26.7 million, down from $43.8 million in Q4 2024 [6]. - Free cash flow decreased to $19.9 million from $36.5 million in Q4 2024 [6]. Full Year 2025 - Total GAAP revenues for the year were $700.4 million, a 7.2% increase from 2024 [6]. - GAAP operating margin improved to 3.6% from 2.8% in 2024 [6]. - GAAP net income attributable to BlackLine was $24.5 million, or $0.39 per diluted share, compared to $161.2 million, or $1.45 per diluted share in 2024 [6]. - Non-GAAP net income attributable to BlackLine was $157.0 million, or $2.13 per diluted share, slightly down from $162.1 million, or $2.18 per diluted share in 2024 [6]. - Operating cash flow for the year was $169.6 million, down from $190.8 million in 2024 [6]. - Free cash flow decreased to $134.9 million from $164.0 million in 2024 [6]. Customer Metrics and Business Developments - BlackLine had a total of 4,394 customers as of December 31, 2025 [5]. - The company achieved a dollar-based net revenue retention rate of 105% [12]. - BlackLine expanded its global cloud footprint to Saudi Arabia and secured an official listing on the FedRAMP Marketplace [12]. - The acquisition of WiseLayer, an AI-powered accounting and finance automation company, was completed to enhance BlackLine's AI capabilities [12]. Financial Outlook First Quarter 2026 - Total GAAP revenue is expected to be in the range of $180 million to $182 million [13]. - Non-GAAP operating margin is projected to be between 18.5% and 19.5% [13]. - Non-GAAP net income attributable to BlackLine is anticipated to be between $31 million and $33 million, or $0.44 to $0.46 per share [13]. Full Year 2026 - Total GAAP revenue is expected to be in the range of $764 million to $768 million [13]. - Non-GAAP operating margin is projected to be between 23.7% and 24.3% [13]. - Non-GAAP net income attributable to BlackLine is anticipated to be between $172 million and $180 million, or $2.37 to $2.48 per share [13].

Core Viewpoint - A class action lawsuit has been filed against Varonis Systems, Inc. for allegedly making materially false and misleading statements regarding its business operations and prospects during the class period from February 4, 2025, to October 28, 2025 [6]. Group 1: Allegations - The lawsuit claims that Varonis failed to disclose that it was not adequately prepared to sustain its Annual Recurring Revenue (ARR) growth without maintaining a high rate of quarterly conversions [6]. - Defendants' positive statements about Varonis's business were allegedly misleading and lacked a reasonable basis [6]. - The company reported a significant decline in term license subscription revenues, with a year-over-year decrease of 63.9% [6]. Group 2: Financial Impact - On October 28, 2025, Varonis announced its third-quarter financial results, which missed consensus estimates and led to a reduction in full-year ARR guidance due to underperformance in its on-prem subscription business [6]. - Following the announcement, Varonis's stock price dropped by $30.66, or 48.7%, closing at $32.34 per share on October 29, 2025 [6]. Group 3: Next Steps for Investors - Investors who purchased Varonis shares during the class period and suffered losses are encouraged to contact Bragar Eagel & Squire, P.C. to discuss their legal rights and options [4][6].

Core Insights - Blackbaud's CEO Michael Gianoni emphasized the central role of AI in the company's product strategy and operations, stating that the company is fully committed to AI initiatives and requires all employees to undergo AI training [1][5][7] Financial Performance - For FY2025, Blackbaud reported organic revenue growth of 5.5%, reaching $1.128 billion, with adjusted EBITDA of $405 million and a margin of 35.9% [4][8] - Non-GAAP EPS increased to $4.45, reflecting a year-over-year growth of approximately 12% after accounting for the impact of the EVERFI divestiture [3][8] - The company generated adjusted free cash flow of $208 million, exceeding the upper limit of its revised guidance [3][8] Capital Allocation - Blackbaud accelerated its share repurchase program, buying back about 8% of its outstanding common stock in 2025, following an 11% repurchase in 2024 [2][8] - Debt leverage improved, decreasing from 2.9x in Q1 to 2.5x by year-end [2][8] 2026 Guidance - The company provided guidance for 2026, projecting revenue between $1.173 billion and $1.179 billion, representing 4% to 4.5% organic growth [6][15] - Adjusted EBITDA is expected to be between $430 million and $438 million, indicating a growth of 6% to 8% year-over-year [6][15] - Non-GAAP EPS is forecasted to be between $5.15 and $5.25, marking a growth of 16% to 18% [15][19] Long-term Targets - Blackbaud aims for organic revenue growth of 4% to 6% from 2026 to 2030, with adjusted EBITDA growth of 6% to 8% CAGR and an expansion of adjusted EBITDA margin to over 40% [18] - The company plans to allocate at least 50% of cumulative free cash flow from 2026 to 2030 for stock repurchases [18] AI Initiatives - The company is rolling out generative AI features across its products, including the introduction of "Blackbaud AI Chat" and the "Blackbaud Agents for Good" initiative, which aims to enhance donor engagement [9][11] - The first product under the Agents for Good initiative is a subscription-based fundraising development agent, expected to generate new revenue streams [12][13] Customer Environment - Gianoni noted that while some customers face funding challenges, the overall environment remains stable, with no significant business closures reported among clients [22] - The company is focusing on internal productivity gains from AI and expanding operations in India to drive margin improvements [23]

Group 1 - Concerns about AI stocks have emerged as investors question the high valuations and the potential returns from significant capital expenditures planned by major tech companies [1][6] - Recent sell-offs in software stocks are attributed to fears that AI could disrupt software-as-a-service (SaaS) products and business models, leading to a paradox where AI is perceived as both struggling and a threat to existing software [2][9] - The heavy investment in AI-related capital expenditures by large tech firms raises doubts about the sustainability of returns, especially given the resource demands of AI, such as power and water for data centers [6][7] Group 2 - A report from the Lawrence Berkeley National Laboratory predicts that by 2028, over half of the power used by data centers will be for AI, potentially consuming electricity equivalent to 22% of all U.S. households [7] - McKinsey estimates that $6.7 trillion will be needed for data center spending by 2030 to meet the growing demand for computing power [7] - Criticism of OpenAI's latest models has led to skepticism about whether the substantial investments in AI will result in significantly improved models, contributing to the recent market sell-off [8][10] Group 3 - The introduction of new AI tools, such as Anthropic's Claude Cowork, has intensified fears that AI could render many existing software models obsolete [9] - Bank of America's Vivek Arya suggests that while AI models offer unprecedented intelligence, the process of harnessing and productizing this intelligence will take several years, indicating a disconnect between current investment expectations and future outcomes [10]

Datadog (DDOG) shares ended roughly 15% higher on Tuesday after the observability service for cloud-scale applications came in handily above Street estimates for its fiscal Q4. As investors cheered the constructive release, DDOG soared past its 20-day moving average (MA), signaling the upward momentum could sustain in the near-term. Versus its November high, Datadog stock remains down about 35%, indicating long-term investors may still have time to initiate a position in this fast-growing artificial inte ...

Core Viewpoint - monday.com Ltd. is facing significant challenges, including a decline in its performance marketing channel, foreign exchange headwinds, and increased investment in AI products, leading to a downward revision of its growth guidance from 27% to 18-19% for FY2026 [2][4]. Financial Performance and Guidance - On February 9, 2026, monday.com disclosed that its 2026 guidance incorporates persistent weakness in its "no-touch" performance marketing channel and a foreign exchange drag of 100-200 basis points due to the appreciation of the Israeli shekel [2]. - The company does not anticipate a rebound in performance marketing or top-of-funnel activity, indicating a structural rather than temporary issue with the no-touch channel [2]. - The stock experienced a decline of approximately 70% from its 52-week highs, falling 13-14% on February 9, 2026, following the earnings call [4]. Investment in AI and Cost Implications - monday.com is increasing its investment in AI products, which includes Monday Vibe, Monday Sidekick, and Monday Agents, leading to a projected decline in gross margins from 90% to the mid-to-high 80s in FY2026 due to AI infrastructure costs [3]. - Research and Development (R&D) spending rose from 17% to 19% of revenue in FY2025, with management guiding for mid-teens percentage headcount growth in FY2026, primarily in sales and R&D [3]. Market Reactions and Management's Communication - The combination of deteriorating no-touch channels, foreign exchange headwinds, rising AI investment costs, and the withdrawal of 2027 financial targets has raised questions among investors regarding the timing of management's recognition of these challenges [4]. - Investors are scrutinizing whether management adequately communicated the shift from temporary disruptions to persistent headwinds earlier than disclosed [2][4].

Core Viewpoint - The discussion highlights a shift in sentiment towards legacy software stocks, with a growing belief that companies like Salesforce, Workday, and ServiceNow may be in a precarious position due to advancements in AI technology [5][6]. Software Industry - There is a notable concern regarding the future of legacy software stocks, with a belief that their business models are under threat from AI advancements [6]. - The recent repricing of software stocks is seen as a reflection of declining hiring needs and increased productivity per employee, indicating a fundamental change in the software landscape [3][4]. - Companies that have historically relied on consistent pricing and expansion, such as Salesforce, may face challenges as their terminal values are reassessed in light of AI developments [4]. AI Sector - The future investment focus is expected to shift towards AI-driven companies that are built from the ground up, rather than legacy software firms [5]. - The productivity gains from AI tools are anticipated to reduce the need for traditional software solutions and the associated workforce [8]. Cryptocurrency Market - Bitcoin has shown signs of stabilization, but there are mixed opinions on its future trajectory, with some analysts predicting potential declines [9][10]. - Companies like Robinhood are diversifying beyond crypto, which may help mitigate weaknesses in their crypto-related business [11]. - The volatility in the cryptocurrency market has led to a demand for more sophisticated treasury solutions that can manage risks associated with Bitcoin and Ethereum [14].

Core Viewpoint - The tech sector is experiencing a shift as investors are increasingly focusing on small and midcap stocks, moving away from mega cap tech dominance, driven by underallocation, reasonable valuations, and better growth prospects in smaller companies [1][2][3][5]. Group 1: Market Dynamics - There is a notable underallocation to small and midcap stocks, currently at about 3% of the Russell 3000, compared to a typical allocation of 7.5% [3]. - The Russell 2500 growth index is trading at approximately 21.5 times earnings, which is below the S&P 500's typical range of 15 to 17 times over the past 20 years [4]. - Small cap stocks are projected to grow at a forward sales rate of about 16%, compared to 11% for the S&P 500, indicating a potential for better growth in smaller companies [5][6]. Group 2: Economic Environment - The current economic environment, characterized by low inflation and potential GDP growth of around 5%, is favorable for small cap stocks [6][7]. - Increased productivity is helping to keep wage-push inflation down, and tariffs have not significantly impacted the market [8]. Group 3: Sector Performance - Investment is shifting from software to hardware and semiconductor sectors, particularly benefiting companies involved in AI data center buildouts, with capital expenditures expected to rise from $200 billion in 2024 to $650 billion in 2025 [11][12]. - Software companies are facing challenges, with an average decline of 20% year-to-date and a 40% drop in small cap software over the past year [12][13]. Group 4: Investment Opportunities - Companies like Data Dog and Dinatrace are highlighted as strong investments due to their embedded roles in network infrastructure and high free cash flow growth [15][16]. - In healthcare, companies like Tempest AI are leveraging AI for cancer diagnostics, creating unique databases that enhance drug development [21][22]. Group 5: Broader Market Implications - A broadening market, with increased investment in small and midcap stocks, is seen as healthy for the overall economy, potentially benefiting consumer spending [30][31]. - The disconnect in valuations between small and large cap stocks is historically significant, suggesting potential for growth in the small cap sector [32].

Core Viewpoint - Applovin Corp's stock has shown a significant increase following the retraction of negative statements by short seller CapitalWatch, with expectations for strong earnings in the upcoming report [1][2]. Group 1: Stock Performance - Applovin's stock rose by 1.9% to $469.19, building on a previous 13.2% increase [1]. - The stock has a history of positive post-earnings performance, finishing higher after all eight of its last earnings reports, with an average increase of 18.5% [2]. - Currently, the stock is down 29.9% in 2026 but has gained 15.5% this week [3]. Group 2: Earnings Expectations - Analysts expect earnings of $2.89 per share for the upcoming quarter, representing a year-over-year increase of 67.05% [2]. - The options market is pricing in a 21.9% swing for this earnings report, indicating high volatility expectations [2]. Group 3: Short Interest - Short interest in Applovin's stock is at 5.8% of the available float, suggesting a potential for short covering, which would take over three days at the current trading pace [3].