Software stocks surged Thursday as strong earnings reports powered the sector even as the broader market pulled back. Datadog led the rally, jumping 31% after posting 32% year-over-year revenue growth and securing clients including Samsung and a major AI foundation model company.

Fortinet climbed 20% on higher demand for its cybersecurity offerings driven by artificial intelligence adoption. PTC, Workday, and MongoDB each gained at least 6%. The moves came as roughly 85% of S&P 500 companies that have reported so far have beaten earnings estimates—one of the best seasons in recent memory.

While the S&P 500 slipped 0.4% and the Dow fell 314 points, the tech-heavy Nasdaq weathered the retreat, down just 0.1%. Julia Hermann from New York Life Investment Management noted a "halo effect" where the Magnificent Seven's performance has lifted the broader S&P 500, with software and cybersecurity names now following suit.