What happened

Thursday was a rough day for cloud stocks as two high-profile names in the sector plunged after their second-quarter updates last night.

Okta (OKTA -1.56%) and MongoDB (MDB -1.81%) were down more than 20% today after they delivered solid quarterly numbers last night, but dialed down future expectations over concerns about the macroeconomic climate. That, and the ongoing focus on rising interest rates, hit the Nasdaq hard, bringing down the tech-heavy index 1.8% as of 1:58 p.m. ET today.

The bad news from Okta and MongoDB weighed on smaller software-as-a-service (SaaS) stocks in particula,r with Appian (APPN -2.89%), PagerDuty (PD -2.82%), and Marqeta (MQ -3.72%) falling today by 8.2%, 10.1%, and 7.6%, respectively, on the news.

So what

Okta and MongoDB both had the strong results in the second quarter, but each one warned about the upcoming months in a different way.

Okta, which provides cloud identity software, said it had faced challenges in its integration with Auth0, the customer-identity software company it acquired last year. Those included a higher-than-expected attrition rate among the Auth0 salesforce and some confusion in the field about which products were right for which customers.

Okta said on the earnings call that it was lowering its calculated billings guidance for the year by $140 million to a range of $2.04 billion to $2.05 billion, a reflection of the sales challenges and macroeconomic headwinds, and said it was reevaluating its long-term growth target of $4 billion in fiscal 2026, which ends in January 2026.

Meanwhile, MongoDB, a database software company, also beat analyst estimates and raised its full-year guidance, but factoring in the second-quarter results, it actually lowered its revenue guidance for the second half of the year slightly and called for a wider loss than it had three months ago. That weaker bottom-line forecast comes at a time when investors have become particularly skeptical of unprofitable growth stocks. On the earnings call, management said that macro conditions were affecting Atlas, its cloud-based database product, leading to slower revenue recognition. Nonetheless, Atlas revenue was still up 73% from the quarter a year ago, and now makes up 64% of MongoDB's revenue.

Despite the strong results in the second quarter from Okta and MongoDB, the commentary on the macro environment and guidance was enough to spook peers like Appian, PagerDuty, and Marqeta.

Appian is a maker of low-code software and now does most of its business through cloud subscriptions. Like other cloud stocks , Appian was incredibly volatile during the pandemic, soaring to nearly $300 before crashing to close to $40 today. Appian already reported second-quarter results, which the market mostly shrugged off, but the stock has fallen over the two last weeks on concerns about higher interest rates and a weakening economy. Appian is also unprofitable, making it more vulnerable to a market sell-off.

PagerDuty, which sells software that notifies customers when it has digital outages, is reporting earnings after hours today, and investors seem to be increasing their bets that the stock will face the same macro-level headwinds as Okta and MongoDB. PagerDuty trades at a lower multiple than many of its cloud peers, a reflection of its slower growth, and the stock has been steadier over the last couple of years than much of the sector. For its report later today, analyst are expecting an adjusted loss of $0.08 per share on revenue of $88.1 million, which was up 30.5% from a year ago.

Lastly, Marqeta, a cloud-based company that enables businesses to issue payment cards, has also closed the book on its second quarter. The company plunged on that report, more so because of the surprise departure of the CEO and the chief operating officer just a year after the company went public, than for the results themselves. The revolving door in the C-suite leaves a big question mark at a time when the market is already skeptical about unprofitable tech stocks like Marqeta.

Now what

Investors in Appian, PagerDuty, and Marqeta should be prepared for more volatility and uncertainty because these stocks will continue to have outsize moves in response to news about interest rate hikes or the health of the broader economy.

Additionally, commentary from larger SaaS stocks will also weigh on them as these software providers cater to many of the same customers, mostly big businesses and government organizations. And if sales cycles are getting longer for one of them, meaning customers are getting more cautious with their spending, that's likely happening to vendors across the board.

All three of these are promising growth stocks, but they'll have to demonstrate their ability to turn a profit to be successful in the current market environment.