Gartner IT Sector Selloff: Enterprise Software Stocks Decline Amid AI Spending Caution

The market selloff on February 3, 2026, was triggered by Gartner’s candid assessment of enterprise customer behavior during its Q4 2025 earnings call, where executives explicitly stated that customers are “slowing and deferring everything possible” as they attempt to navigate the evolving artificial intelligence landscape [1][2]. This commentary represents a significant departure from the optimistic AI investment narrative that has dominated enterprise technology discussions, instead highlighting a more cautious stance among enterprise decision-makers who are demanding clearer return on investment trajectories before committing capital.

The market’s reaction was broadly negative for growth-oriented technology stocks, with the NASDAQ Composite declining -1.74% (approximately 415 points) to close at 23,255, significantly underperforming the S&P 500’s more modest -0.97% decline [0][3]. This differential of nearly 80 basis points between the two major indices indicates that growth-oriented technology equities bore the disproportionate burden of selling pressure, consistent with the risk-off sentiment that characterized the trading session. Trading volume on the NASDAQ surged to 8.63 billion shares, substantially exceeding recent averages and confirming the conviction behind the selling pressure [0].

The Technology sector’s -2.60% decline on February 3 positioned it as the second-worst performing sector, trailing only Consumer Cyclical at -3.69% [0]. This sector performance pattern reveals a notable defensive rotation occurring within the market, as investors repositioned away from growth-oriented technology investments toward more stable, economically defensive positions in response to concerns about enterprise IT spending weakness. The contrast between losing and winning sectors was stark: while Technology and Consumer Cyclical experienced significant declines, traditionally defensive sectors posted solid gains, with Energy rising +2.97%, Consumer Defensive advancing +1.89%, Basic Materials adding +1.02%, and Industrials posting a modest +0.14% [0].

The Gartner commentary’s impact was most pronounced among enterprise software and IT services stocks, with the affected companies displaying significant price deterioration from their recent highs [0]:

Adobe (ADBE) experienced the steepest decline among the major software names, falling -48.27% from its period high to trade at $271.93, with its 20-day moving average standing at $306.33. ServiceNow (NOW) declined -41.42% to $109.77 against a 20-day average of $131.66. Atlassian (TEAM) fell -35.85% to $105.00 from a 20-day average of $132.17. Intuit (INTU) declined -33.17% to $434.09 against its 20-day average of $561.99. Salesforce (CRM) fell -26.52% to $196.38 compared to its 20-day average of $233.37. Microsoft (MSFT), the largest software company by market capitalization, experienced a more modest decline of -5.31% to $411.21 against a 20-day average of $459.49, suggesting some resilience among the most diversified technology giants [0].

Gartner’s characterization of enterprise customer behavior reveals a critical inflection point in the enterprise technology market. The statement that customers are “slowing and deferring everything possible” indicates a systematic budget constraint approach among enterprise decision-makers [2]. This deferral behavior appears to be driven by several interrelated factors: the desire to await clearer AI ROI trajectories before committing significant capital, uncertainty regarding governance frameworks for AI deployments, and a general sense of caution as organizations attempt to understand how rapidly evolving AI capabilities might impact their technology roadmaps.

The observation that “the value bar is higher” suggests customers are demanding more demonstrable value propositions before greenlighting new IT commitments [2]. This phenomenon represents a meaningful shift from the experimentation phase that characterized much of 2024 and early 2025, when enterprises were willing to allocate exploratory budgets to understand AI’s potential. The current phase appears to be characterized by a more disciplined evaluation process where IT vendors must demonstrate concrete returns to secure budget allocations.

The Gartner commentary aligns with a broader pattern of software sector weakness that has persisted since early January 2026 [4]. The sector is experiencing what industry analysts characterize as a structural transition period as enterprises move from AI experimentation to deployment. This transition appears to be creating a decision-making vacuum where enterprises are deferring technology commitments until the return profile of AI investments becomes more quantifiable and the governance frameworks mature.

Several specific factors are contributing to this environment. Investors are reassessing how quickly AI-native companies, such as OpenAI and Anthropic, could disrupt the established enterprise software market. Enterprises themselves are demanding more concrete proof of AI ROI before committing significant capital, representing a shift from earlier enthusiasm-driven investment patterns. Some analysts estimate that approximately 25% of AI-related spending could be deferred as technology leaders wait for more provable governance and return frameworks [5].

Despite the broad-based weakness in enterprise software, selective strength was evident among companies perceived as having differentiated AI positioning. Palantir, which has positioned itself as an AI-powered data analytics platform with clear enterprise deployment use cases, rose +4.4% on the same day that the broader sector declined [1]. This divergent performance suggests that investors are distinguishing between companies facing customer spending headwinds and those with demonstrable AI differentiation that can justify continued enterprise investment even in an environment of heightened spending scrutiny.

The analysis reveals several risk factors warranting attention from market participants. Enterprise spending caution, as directly observed through Gartner’s customer feedback, indicates a material slowdown in IT decision-making that could persist until AI governance and ROI frameworks mature sufficiently to provide enterprise decision-makers with greater confidence [2]. This near-term headwind appears more pronounced than many analysts had anticipated, suggesting potential earnings estimate revisions for enterprise software vendors in upcoming quarters.

Sector multiple compression represents a significant concern, as the substantial price declines of 26% to 48% across major software stocks reflect not only earnings concerns but also fundamental repricing as investors reassess growth trajectories [0]. Adobe’s nearly 50% decline from period highs represents a particularly stark example of this multiple contraction, with the company’s valuation potentially facing structural challenges if the enterprise spending environment remains constrained.

Competitive disruption risk has intensified as AI-native companies emerge as potential competitors to traditional enterprise software vendors. The traditional software model of selling perpetual licenses or subscription-based access is being challenged by AI-native offerings that may provide capabilities more efficiently or at lower cost, potentially capturing enterprise technology budgets that might otherwise flow to established vendors.

Despite near-term challenges, several factors suggest potential opportunity windows for longer-term investors. AI infrastructure spending remains projected to reach $1.4 trillion in 2026, indicating substantial long-term demand fundamentals that persist despite current deferral behavior [7]. This projected spending level suggests that the current deferral phase may represent a timing shift rather than a fundamental reduction in enterprise technology investment appetite.

The transition of enterprise AI deployments from experimentation to execution phase indicates that organizations are moving beyond initial exploration toward more substantive implementations. While this transition is creating near-term uncertainty and deferral behavior, successful early adopter deployments could catalyze broader enterprise spending as proof points accumulate regarding AI’s practical enterprise value.

Companies with clear, demonstrable AI differentiation that can justify investment even in a constrained spending environment may benefit from relative outperformance. The divergence between Palantir’s +4.4% gain and broader sector weakness demonstrates investor willingness to reward companies perceived as having AI capabilities that deliver measurable enterprise value [1].

Market participants should monitor several key indicators in the coming weeks and months. Upcoming earnings reports from other enterprise software companies will provide additional data points regarding customer spending behavior and whether Gartner’s characterization represents a sector-wide phenomenon. AI infrastructure spending data will indicate whether the projected $1.4 trillion in 2026 AI spending remains on track despite current deferral patterns. Federal Reserve policy decisions will influence both growth stock valuations and enterprise capital allocation decisions. Enterprise AI deployment announcements from early adopters could accelerate spending decisions if success stories demonstrate clear ROI. Gartner’s own contract value metrics, which slowed to just 1% year-over-year, will serve as a leading indicator for the broader enterprise IT spending environment [8].

Gartner’s February 3, 2026 earnings call commentary revealed that enterprise customers are adopting a cautious stance toward IT spending, “slowing and deferring everything possible” as they navigate the evolving artificial intelligence landscape [1][2]. This assessment triggered a significant selloff in enterprise software and IT services stocks, with the Technology sector declining -2.60% and the NASDAQ falling -1.74% as investors repriced near-term growth expectations [0][3]. Major software stocks experienced substantial declines from recent highs, with Adobe falling -48.27%, ServiceNow declining -41.42%, Atlassian down -35.85%, Intuit falling -33.17%, and Salesforce declining -26.52% [0].

The sector rotation pattern revealed defensive positioning, with Energy, Consumer Defensive, Basic Materials, and Industrials outperforming as investors reduced exposure to growth-oriented technology [0]. Gartner’s contract value growth slowing to just 1% year-over-year provides additional confirmation of near-term headwinds facing the enterprise technology sector [8]. While long-term AI infrastructure spending projections remain robust at approximately $1.4 trillion for 2026, the near-term outlook for enterprise software vendors appears challenged by current deferral behavior as organizations await clearer ROI frameworks and governance protocols before committing capital [7].

The software sector is experiencing a structural transition from AI experimentation to deployment, creating a decision-making vacuum that has compressed valuations and prompted defensive sector rotation. Companies with demonstrable AI differentiation, such as Palantir which posted +4.4% gains amid sector weakness, may prove more resilient in the current environment [1]. The market’s reaction suggests skepticism regarding near-term growth trajectories for enterprise software vendors, though longer-term demand fundamentals associated with enterprise AI adoption remain intact.