What happened

Shares of cloud computing company ServiceNow (NOW 2.45%) tanked 11.7% today as of 11:40 a.m. ET. The tumble was dragging down other cloud stocks too, especially those that specialize in customer relationship management and business digitization. Cloud pioneer Salesforce (CRM -0.79%) was down 4.1%, and smaller customer relationship software outfit HubSpot (HUBS 2.28%) was down 4%.  

For the sake of comparison, the S&P 500 and Nasdaq Composite indexes were both up about 0.2% each.  

So what

What was the reason for ServiceNow's steep decline? There was no specific financial news to cause the downturn. However, ServiceNow CEO and seasoned tech executive Bill McDermott appeared on CNBC's Mad Money last night and talked about macroeconomic headwinds that are deeply impacting the business world right now. Specifically, McDermott said a strong and still strengthening U.S. dollar (which negatively impacts revenue for companies that do work outside the states), rising interest rates, inflation, and war in Europe are darkening the mood among business decision-makers.  

Given the present environment, many businesses are tightening up on spending. McDermott said companies are focusing attention on tech projects that have a fast ROI (return on investment). If a project has a long timeline until it starts paying for itself, there's a good chance of it being postponed until economic conditions improve. 

ServiceNow offers automation software that helps a company digitize a process and get more efficient -- just the type of project likely to get a green light. Salesforce and HubSpot have similar software suites with a focus on helping employees use their time more effectively and deliver the right marketing material to prospective customers at the right time. Nevertheless, the cautious words from McDermott were not greeted positively by the market today. Cloud stocks were in retreat as these "macroeconomic headwinds" could lead to downward revisions in revenue and profit growth for ServiceNow and its peers. 

Now what

Macroeconomics aside, McDermott did say the current mood out there in the business world is not nearly as gloomy as Wall Street thinks it is right now. In fact, though corporate decision-makers are taking a harder look at spending, many cloud providers are still winning lots of new deals and growing at a healthy clip as a result. 

This was the message Salesforce CEO Marc Benioff had during his company's earnings update on May 31. Full-year revenue growth was lowered slightly, but Salesforce is still on track to expand about 20% versus last year. Not bad, Salesforce.  

Smaller HubSpot is doing just fine too. It reported a 41% year-over-year revenue increase in Q1 2022. It's full-year 2022 outlook calls for about 33% sales growth over 2021. As for ServiceNow, it grew its subscription revenue 26% in Q1. However, after hearing McDermott's comments yesterday, some stock analysts think ServiceNow might offer up a lowered outlook during its next earnings update on July 27. Until then, though, the current ServiceNow outlook stands at 26% subscription growth for full-year 2022. Stay tuned for more updates in the coming weeks.

I believe these macroeconomic headwinds and the angst they are causing among many market participants simply spells opportunity for long-term investors in quality software businesses like ServiceNow, Salesforce, and HubSpot. All three companies are growing and generate ample profitability (as measured by free cash flow). It's a potent combination that sooner or later the market will reward. Patience will be required, but if these cloud companies keep expanding -- even at a slightly slower pace -- they look like a great value if you plan to buy and sit on them for at least a few years.