This Feels Similar To 2008 in Softwareland
In Softwareland this feels similar to the beginning of the 2008 recession. We are seeing weakness where one would expect to see weakness.
(companies mentioned: ACN, CRM, GOOGL, HUBS, META, PAYC)
Sales & Marketing. The Sales & Marketing area has experienced headcount cuts. Salesforce automation companies such as CRM and HUBS forecast slower growth for Q2.
HRMS: Payroll/HRMS companies such as PAYC started to see slower growth in Q4 as customer companies have exercised headcount reductions. PAYC’s growth rate went from 27% in Q2 ‘23 to 22% in Q3 ‘23 to 17% in Q4 ‘23 to 11% in Q1 ‘24 to approximately 8% forecast for Q2. Growth will go flat-to-negative in a full recession if the Fed and the Biden Admin allow a recession to run its course.
Online Ad spend. META forecast slower growth for Q2 - approximately 16% versus 27% in Q1. GOOGL also sees growth slowing, (although they say its due to a tougher comp).
Consultants. Companies slow the pace of spend on discretionary projects when business slows. This hits the consulting firms. We saw Accenture’s (ACN) revenues and new bookings go negative in the February quarter and this weakness will likely continue - and likely get worse - when the company reports results later this month. You don’t want to be long the SIs as the economy softens.