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ServiceNow reported second-quarter results the evening of Wednesday, July 22, beating Wall Street’s expectations on revenue, margin, and bookings.The backdrop made that harder than it sounds. Investors had spent the prior week watching IBM and Pegasystems blame artificial intelligence spending shifts for wrecking their own software businesses, and the market was primed to punish any sign of the same weakness.IBM shares fell 25% on July 14, after warning that clients were shifting technology budgets toward AI infrastructure instead of software.Pegasystems followed on July 22, dropping more than 16% after missing revenue estimates and citing what it called unprecedented disruption from AI competition, according to Yahoo Finance.Traders had started calling it the “SaaSpocalypse,” Forbes noted, a bet that enterprise software growth was about to slow across the board.ServiceNow (NOW) avoided that fate. Subscription revenue reached $3.9 billion in the quarter, up 24.5% from a year earlier, a ServiceNow press release confirmed.Shares climbed 5.5% in premarket trading Thursday, July 23, to $100.67, according to Benzinga, as the same release disclosed that artificial intelligence contract value had crossed $1 billion, the number that dominated most of the day’s coverage.A different billion-dollar number tells ServiceNow’s real storyThat AI milestone was not the most consequential number on the call. ServiceNow’s security and risk business sells cybersecurity and compliance tools bolted onto its main workflow platform.It had already crossed $1 billion in annual contract value organically back in the third quarter of 2025, according to a ServiceNow press release, before two acquisitions extended the lead.CEO Bill McDermott put it bluntly on the July 22 earnings call, describing “a 10-figure cybersecurity business that’s growing faster than all the other top cybersecurity companies.”That is a different kind of claim than the artificial intelligence milestone, since it points to an already profitable, already scaled unit rather than a nascent product line.

ServiceNow’s security and risk business has grown into a billion dollar unit and is now the fastest growing among the top 10 enterprise cybersecurity companies.Bloomberg / Getty Images

ServiceNow’s 2 acquisitions built the business in 8 monthsServiceNow paid $7.75 billion in cash for cyber exposure firm Armis in December, its largest acquisition ever, and closed the deal in April.Three weeks earlier, it had agreed to buy identity security company Veza for roughly $1 billion. Together, the deals were expected to more than triple ServiceNow’s addressable market in security and risk.Related: ServiceNow gets bearish call before major earnings testThe spending mirrors a broader pattern among software companies. Google parent Alphabet paid $32 billion for cloud security startup Wiz, and Palo Alto Networks spent $25 billion on identity security firm CyberArk, both within the past year, according to CNBC.Enterprise software companies increasingly treat cybersecurity as the growth engine that core subscription seats can no longer guarantee alone.The same week, a critical flaw exposed the platform’s own riskHowever, buying top-tier security firms does not automatically secure a company’s underlying foundation. The timing carries an uncomfortable irony. Nine days before the earnings call, ServiceNow disclosed a critical vulnerability in its AI Platform, tracked as CVE-2026-6875, that let unauthenticated attackers execute code without a username or password, according to SecurityWeek.Researchers confirmed active exploitation beginning July 17, according to BleepingComputer, and ServiceNow said it had found no evidence the attacks reached instances it hosts, according to Help Net Security.More AI:Workers just sent AI companies an ultimatumPalantir CEO has a blunt verdict on OpenAI and AnthropicElon Musk pulls no punches with AI rivals as Grok 4.5 debutsThat does not undercut the security business as a growth story, but it complicates the pitch. ServiceNow is asking enterprise customers to trust it as their cybersecurity vendor in the same week its own platform needed an emergency patch.Neither McDermott nor the analysts covering the stock addressed the vulnerability on the call.Software companies are betting security can outrun AI disruptionServiceNow’s quarter offers a preview of how mature software companies plan to survive the reallocation of corporate budgets toward AI infrastructure. Rather than compete directly for that spending, they are acquiring their way into categories like cybersecurity, where demand keeps climbing, regardless of the macro environment.Global spending on information security is projected to grow more than 12% in 2026, to roughly $240 billion, according to a ServiceNow press release.That strategy worked for ServiceNow this quarter. It depends on integration going smoothly and on the acquired businesses outrunning the disruption that just hit IBM and Pegasystems.Investors weighing enterprise software stocks may need to ask less about how fast a company is adopting AI and more about how fast it can buy its way into markets AI cannot replace.Related: Jim Cramer gives his two cents about Netflix stock

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Amazon created Prime Day to reward its most loyal shoppers.More than a decade later, the event has grown far beyond Amazon.Walmart, Target, Best Buy, Kohl’s, and other major retailers now routinely launch competing promotions around Prime Day, turning a once Amazon-centric sale into one of the biggest shopping periods of the summer.U.S. shoppers spent a record $26.4 billion online during Amazon’s four-day Prime Day period from June 23 through June 26, according to Adobe Analytics.That was up 9.3% from a year earlier.But beneath the record spending, new data reveals a more complicated picture for Amazon.Amazon shoppers spent less per order and per household than they did a year earlier, while competing retailers experienced significant increases in store traffic during the same promotional period.The shift suggests consumers remain willing to spend when discounts are strong, but are increasingly spreading those dollars across retailers rather than concentrating their shopping on Amazon.That trend is emerging just as Amazon prepares to report second-quarter earnings on July 30.Amazon shares fell about 4.6% on July 23 to $233.66 as technology stocks came under pressure following Alphabet’s latest earnings report and renewed concerns about the cost of artificial intelligence infrastructure.The stock has declined 6.35% over the past five days and 8.26% over the past three months, while remaining up about 1.4% over the year.Amazon Prime Day spending hits record, but growth slowsPrime Day continues to generate enormous consumer spending.Adobe Analytics said U.S. retailers generated $26.4 billion in online sales during the four-day 2026 Prime Day period, up 9.3% year over year.That set another record for the summer promotional period. However, the pace of growth was substantially slower than a year ago.More Amazon:Bank of America doubles down on Amazon shares after Prime DayAmazon’s $8.3 billion Prime Day sends Wall Street a warningAmazon Prime Day gives Wall Street a $22B reason to take noticeDuring the comparable four-day Prime Day period in 2025, U.S. consumers spent $24.1 billion online, according to Adobe, representing 30.3% growth from the comparable four-day period a year earlier.Although the 2024 comparison should be used within context.Amazon’s official Prime Day event lasted only two days in 2024, compared with four days in both 2025 and 2026.Adobe reported $14.2 billion in U.S. online spending during the two official Prime Day days in 2024, up 11% year over year.The more recent figures nevertheless show that industrywide spending continued to reach records in 2026, even as growth slowed sharply from the previous year.

Amazon stock is up 1.4% year to date.Peter Dazeley / Getty Images

Amazon shoppers spend less per orderNumerator, a consumer data firm, found that the average Amazon Prime Day order in 2026 was $47.66, down from $53.34 in its comparable year-earlier analysis.Average household spending also declined to about $143.45 from $156.37 a year earlier.Nearly two-thirds of households that shopped during Prime Day placed at least two separate orders, suggesting consumers remained engaged with the event.But they spent less each time they checked out.In May, Bank of America Consumer Spend Collective data showed U.S. e-commerce spending increased 13% year over year, while online shopping penetration rose 1.8 percentage points to 29.8%.The latest BofA data suggests that momentum continued into the second quarter.In a July 22 research note shared with TheStreet, Bank of America analyst Justin Post said aggregated credit- and debit-card data showed online spending growth accelerated by 2 percentage points from the first quarter.At the same time, the bank said the Prime Day sales-growth bump appeared more modest than in previous years.The figures point to a consumer who remains willing to spend online but is becoming less loyal to any single promotional event.Walmart, Target, Best Buy gain from Prime WeekWhen Amazon held Prime Day from June 23 through June 26, several of its biggest retail rivals launched overlapping promotions.Placer.ai found that all four major chains it analyzed experienced increased store traffic during the promotional period compared with their typical day-of-week traffic.On June 23, the opening day of Prime Day:Visits to Kohl’s were 18.4% above the retailer’s year-to-date day-of-week baselineBest Buy traffic increased 18.1%Target visits rose 16.3%.Walmart recorded a more modest but still positive increase of 4.7%All four retailers continued to experience elevated traffic through the promotional period, according to Placer.ai.Amazon’s competitors are increasingly using the event to capture consumers already in a deal-seeking mindset.Placer.ai characterized the behavior as evidence of a pressured but engaged consumer who is increasingly willing to wait for promotional events before making purchases.For Amazon, that creates both an opportunity and a challenge.Prime Day can stimulate enormous consumer demand, but Amazon no longer has that demand all to itself.Amazon earnings preview points to stronger retail growthDespite more modest Prime Day growth, Bank of America expects Amazon’s broader retail business to accelerate when the company reports second-quarter earnings.BofA maintains a Buy rating on Amazon, with a price objective of $310, ahead of the earnings.Additionally, the firm forecasts Amazon will report total second-quarter revenue of about $198.8 billion, above the roughly $196.8 billion Wall Street estimate the bank cited.The firm expects operating income of approximately $24.1 billion, also slightly above Wall Street’s $23.6 billion estimate.North America could be a strong contributor: BofA expects North American revenue of about $116.3 billion, representing roughly 16% year-over-year growth.Wall Street is expecting about $113.9 billion, according to estimates cited by the bank.The stronger outlook reflects continued strength in online consumer spending and Amazon’s decision to move Prime Day from July to June.This timing gave Amazon an additional sales boost in the second quarter, but the benefit will reverse when the company reports third-quarter results.BofA expects North American retail revenue to decline by roughly $1 billion sequentially in the third quarter because Prime Day sales were pulled forward into June.The timing could create an approximately 4-percentage-point headwind to year-over-year North American growth comparisons.AWS expectations remain highInvestors will also be closely watching Amazon Web Services.AWS revenue increased 28% year over year to $37.6 billion during the first quarter, its fastest growth rate in 15 quarters.Bank of America raised its second-quarter AWS growth estimate to 33% from 31%, which would put revenue at roughly $41 billion.Wall Street is expecting about $40.5 billion and approximately 31% growth, but investor expectations may be higher.BofA said its conversations suggest investors could be expecting AWS growth of around 34%, meaning Amazon may need to outperform published consensus estimates to impress Wall Street.The bank expects AWS growth to accelerate further to approximately 36% in the third quarter.Amazon faces increased retail rivalry and AI costsAmazon’s growth outlook raises another question: how much the company will need to spend to sustain it.Amazon has said it expects approximately $200 billion in capital expenditures in 2026, much of it tied to cloud and artificial intelligence infrastructure.Bank of America believes the figure could increase to around $210 billion, partly because of higher memory costs and continued demand for computing capacity.For the second quarter alone, BofA expects capital expenditures of roughly $49 billion.That level of spending has increased investor scrutiny across Big Tech, particularly as companies race to expand AI infrastructure before the investments generate clear returns.For Amazon, however, the upcoming earnings report will also reveal something more fundamental about its original business.Prime Day still generates record levels of online spending, but shoppers now have more places than ever to chase the same deals.Amazon’s challenge is no longer simply getting consumers to spend during Prime Day, it’s making sure enough of that spending still happens on Amazon.Related: Mark Zuckerberg backs Elon Musk Silicon Valley decision

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Alphabet just reported the strongest quarter in Google Cloud’s history. Revenue came in at $119.8 billion, up 24% year over year. Cloud grew 82% to $24.8 billion and blew past analyst estimates. The Cloud backlog hit $514 billion. Nearly 90% of the Fortune 100 is using Gemini Enterprise. By most definitions, that is a blowout quarter.The stock fell 6.5% the next morning. Capital expenditures came in at $44.9 billion for a single quarter. Free cash flow turned negative. Most of the net income surge came from a one-time gain on the Anthropic stake. Strip that out and investors were left looking at a company spending at a rate that makes even strong revenue growth feel like it may not be enough. Microsoft (MSFT) reports July 29 and Meta reports July 30. The next week is effectively a live test of whether the AI trade’s math actually works.What Alphabet’s Q2 results reveal about the AI trade’s biggest riskThe Alphabet (GOOGL) reaction captures the problem in one quarter. Cloud revenue grew faster than at any point in the company’s history. Investors sold the stock anyway, CNBC reported. The issue isn’t whether AI is generating revenue. It’s whether the capital required to generate that revenue is sustainable, and whether the returns will ever justify the scale of investment.More Wall Street:Wall Street sends strong 4-word verdict on the stock marketWall Street’s $200 billion IPO wave threatens sell-offWall Street flees software plays for triple-digit chipmaker boomForty-four billion dollars in quarterly capex is not a small number. Annualized, that’s close to $180 billion from Alphabet alone. When you add Microsoft, Meta (META), and Amazon (AMZN), the combined spending for 2026 is running toward $725 billion, with analysts projecting it could cross $1 trillion in 2027, CNBC reported. The question the market is now pricing into every print is how long before the revenue catches up, as TheStreet reported ahead of Alphabet’s earnings.The gap between AI spending and AI revenue that investors are watchingThe capex-to-revenue gap is the central tension in the AI trade right now. Sequoia analyst David Cahn has calculated that there is roughly a $600 billion annual gap between what hyperscalers are spending on AI infrastructure and what the AI ecosystem generates in actual sales, Forbes reported. Goldman Sachs has noted that to justify the scale of investment, hyperscalers would collectively need to generate more than $1 trillion in annual profits, more than double current consensus estimates, as TheStreet reported. According to Allianz Research, the divergence between AI capital spending and revenue growth is running at 46%, already wider than the 32% divergence seen during the 2001 telecom cycle that preceded years of pain in tech stocks.Michael Heinrich, co-founder and CEO of 0G Labs, which builds decentralized AI infrastructure, described the dynamic plainly in an interview with TheStreet: “When the capital going into a technology outruns the revenue coming out of it by that margin, valuations are pricing perfection.”Alphabet’s results were exceptional. And still, free cash flow went negative. That’s what “pricing perfection” looks like in practice: a quarter that would have been a strong earnings beat in any other sector, and a stock that still dropped because the bar for AI spending to produce proportional returns keeps moving higher.

The Alphabet reaction captures the problem in one quarterMichael/Getty Images

How the AI rally compares to the dot-com era and where it divergesThe comparison to the late 1990s is now coming from serious voices. JPMorgan CEO Jamie Dimon said earlier this month that AI spending may not “pay off the way you expect and the timetable you expect.” He drew a direct parallel to the internet boom, where the technology proved transformative but the timeline disappointed nearly everyone who priced it in early.Heinrich sees both the parallel and where it breaks.”The similarity is the reflexive bidding up of anything with the label attached, well ahead of proven business models. The difference is that the underlying technology this time is already generating real usage and real cash flows, so this is less a fiction problem and more a physics and economics problem,” he added.The dot-com era was full of companies with no path to revenue. AI has actual enterprise customers paying for actual products. Google Cloud at 82% growth is not a fiction. The risk isn’t that the technology doesn’t work. It’s that the cost of delivering it at scale may not produce returns proportional to the capital being committed, at the speed the market has priced in.What Microsoft and Meta need to show for the AI test to passMicrosoft’s July 29 report will be the next data point. Azure guided for 39% to 40% growth in constant currency. If it delivers at or above that, the market will read it as confirmation that cloud AI spending is translating into revenue acceleration. If it misses, questions about the return on $190 billion in annual capex get louder fast, as TheStreet reported.Meta reports July 30 against its own complicated backdrop. The company has already cut 8,000 jobs this year and moved thousands of employees into AI roles, then acknowledged at an internal meeting that AI-agent progress has not accelerated as expected.The question on Meta’s call is whether $125 billion to $145 billion in AI spending this year is producing the kind of product traction that justifies it.Three things will tell investors whether the AI trade is facing a healthy correction or something more serious: Whether the gap between AI infrastructure spending and AI revenue is narrowing;If AI is moving from assistant to agent, meaning systems that complete tasks and get paid for outcomes rather than just answering questions, and Whether the unit economics of running AI inference are falling fast enough to make applications viable at scale. The next two earnings reports will give investors more data on all three than any single quarter has provided yet.Related: Scott Bessent sends unprecedented warnings to China on AI models

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At this stage of the year, parents all over the country are opening their wallets and hitting their local big-box stores to stock up on back-to-school items. And many are straining their budgets to do so.A good 45% of parents plan to take on debt to pay for back-to-school shopping this year, according to Credit Karma.And all told, parents expect to spend a collective $30.4 billion on back-to-school items for K-12 students, according to Deloitte. That amounts to an average of $557 per student.All of this is coming at a time when broad inflation is up 3.5% year over year, according to the most recent Consumer Price Index.Given that so many families are struggling financially due to general economic circumstances, a lot of parents will be seeking out deals in the coming weeks. That presents a huge opportunity for Costco. Yet it’s one the warehouse club giant isn’t really taking advantage of.Costco misses a key opportunityMembers who head to Costco expecting aisles full of notebooks, pencils, crayons, and folders may be surprised.While the warehouse club offers plenty of products aimed at students, it has never made traditional school supplies a major category. Related: Walmart quietly found a way to undercut Costco on gasA look at Costco’s online school supply assortment shows only a limited selection of writing supplies, with just a handful of products available compared to mass retailers that devote entire departments to back-to-school merchandise.Costco does have more to offer in non-school supply categories, like backpacks, apparel, and electronics. But it’s missing out on a big share of the $30.4 billion consumers anticipate spending this year. 

Costco has no plans to capitalize on the back-to-school shopping spree this year.Shutterstock

Costco’s back-to-school shopping strategy is deliberateCostco’s limited school supply assortment may seem like an oversight. But it’s actually a reflection of how the company operates.Costco’s merchandising strategy is built around offering a carefully curated selection of products that deliver exceptional value through larger package sizes and high sales volume. Rather than stocking dozens of brands and product variations, Costco typically limits shoppers to one or two options in a category.More Retail:Costco sees major shift in member behaviorRetail chain shuts all locations as legal changes hit industryCostco makes major investment in online shopping for membersThat model works well for products families buy in large quantities, such as paper towels, bottled water, snacks, and household essentials. School supply shopping, however, often looks very different.Many teachers provide highly specific lists that call for exact notebook sizes, folder colors, glue sticks, dry-erase markers, or other individual items. Parents frequently need small quantities of each product instead of warehouse-sized multipacks, which doesn’t fit Costco’s bulk-first approach.Costco can’t compete with discount chainsCostco also has another merchandising principle that shapes its assortment. The company generally avoids carrying products unless it believes it can offer members a compelling value. If Costco can’t negotiate pricing that allows it to sell an item at a better value than competitors while maintaining its quality standards, it often chooses not to carry the product at all.As Costco CEO Gary Millerchip said during the company’s most recent earnings call, “Our goal is to be the first to lower prices where we see opportunities to do so.”Related: Costco vs. Sam’s Club: Memberships, prices & perks comparedThat philosophy makes commodity school supplies especially challenging. Chains like Dollar Tree and Dollar General have built their businesses around low-priced everyday items, making school supplies a natural fit.Parents can often buy individual notebooks, folders, pencils, and other classroom essentials for around a dollar or less, allowing them to purchase exactly what appears on a teacher’s supply list without paying for larger quantities. Competing against deeply discounted promotions on individual items isn’t consistent with Costco’s business model. Instead, Costco focuses its back-to-school assortment on categories where its buying power and bulk purchasing model can create more meaningful savings, such as the electronics category.Ultimately, Costco’s approach to inventory and product curation makes it difficult for the company to compete on school supplies. That may leave some members disappointed, but it makes sense for the company’s business model.Maurie Backman owns shares of Costco.Related: Costco makes big investment to keep members coming back