Flopped – Earlybirds Invest

Business process solutions developer ServiceNow (NOW -2.86%) didn’t finish the stock trading week on a high note. The company’s share price fell by nearly 3% that day, primarily on news that it will apparently spend a hefty amount on cloud services. This was on a trading session that saw the S&P 500 (^GSPC 0.40%) close 0.4% higher.

That’s one expensive cloud

Towards the end of the trading day on Thursday, Bloomberg reported that ServiceNow has agreed to use the cloud-computing services provided by Alphabet‘s core Google unit.

Person looking at laptop screen with head in hands.

Image source: Getty Images.

The financial news agency, citing an unidentified “person familiar with the agreement,” wrote that ServiceNow will pay $1.2 billion for this across a five-year term.

Like many tech companies, ServiceNow utilizes the services of cloud providers already, but some investors were surely taken aback by the price tag for the Alphabet arrangement. They might have also been spooked by the company’s reveal, in a regulatory document filed on Thursday, that it has committed $4.8 billion in total on such services through 2030.

When contacted by Bloomberg for comment on the story, ServiceNow only responded that it has multiple cloud service contracts. Alphabet refused to offer any comment.

Post-earnings profit taking

It’s also likely that the pullback in ServiceNow on Friday was due to some profit-taking by opportunistic investors. The market was clearly impressed with the company’s second-quarter earnings report published late Wednesday; it notched convincing beats on both the top and bottom lines, after all.

I don’t think Friday’s move should scare anyone away from ServiceNow stock. Particularly with its artificial intelligence (AI)-enhanced offerings, the company’s offerings are clearly resonating with clients, and should continue to do so.

A challenging environment

United Airlines will report its first-quarter 2025 earnings on April 16, and if Delta’s earnings are any indication, United’s management is highly likely to report deteriorating conditions.

Both airlines had already alerted the market to the uncertainty created by tariffs negatively impacting bookings. For example, in early March, Delta Air Lines management told investors that its first-quarter revenue growth would come in closer to 4% compared to previous guidance for growth of 7% to 9%. Ultimately, Delta’s revenue growth came in at 3.3%.

Delta’s CEO Ed Bastian said “uncertainty around global trade” meant that growth had “stalled” with consumers and corporate travel negatively impacted. On a brighter note, he claimed that its international, premium, and loyalty-based revenue displayed “greater resilience.”

Delta declined to update its full-year guidance due to the uncertain market conditions.

What it means for United Airlines investors

Delta’s commentary on international and premium travel holding up provides some comfort, but the weakness in Delta’s main cabin revenue is highly likely also reflected in United’s outlook.

Image source: Getty Images.

However, long-term investors were given more comfort as Delta’s management said it would reduce capacity growth in the second half of the year in response to market conditions. That’s a positive sign as it indicates an industry acting in a disciplined manner when a slowdown occurs.

Investors’ primary near-term concern is stabilizing the trade conflict so the air travel industry can continue recovering from the lockdown periods.

Lee Samaha has no position in any of the stocks mentioned. The Motley Fool recommends Delta Air Lines. The Motley Fool has a disclosure policy.