Stocks close at new record high as US extends ceasefire with Iran

Southwest Airlines reported its first-quarter earnings after the bell on Wednesday. Its shares fell more than 6% in after hours trading.

For the first quarter, Southwest reported:

• Adjusted earnings of $0.45 per share, compared to the $0.47 per share expected by Wall Street analysts polled by Factset.

• Revenue of $7.25 billion, compared to estimates of $7.27 billion.

The carrier guided for adjusted earnings of between $0.35 and $0.65 per share for its second quarter, a range whose midpoint is below estimates of $0.53 per share. Regarding its full-year 2026 earnings estimate of “at least” $4 per share, Southwest declined to give an update “given the ongoing macroeconomic uncertainty.”

“Achieving this outcome would require lower fuel prices and/or stronger revenue performance to offset higher fuel expense,” Southwest said.

Southwest introduced bag fees last year, ending a more than five-decade long “bags fly free” policy. Earlier this month, less than a year later, it joined its major US rivals in hiking its fees by $10 amid surging jet fuel prices.

Southwest, which discontinued its fuel hedging program last year, said it spent $1.36 billion on fuel and related taxes in the first quarter, up 8.6% year-over-year.

Cloud-software giant ServiceNow — which has been something of a poster child for the AI-related software sell-off — saw its shares fall sharply after delivering Q1 results that included a quarter-on-quarter decline in profit margins.

The company reported:

• Revenue of $3.77 billion, higher than the $3.75 billion analyst consensus estimate published by FactSet.

• Diluted adjusted earnings of $0.97 per share, on point with the $0.97 analysts had expected.

• Subscription revenue came in at $3.67 billion vs. the $3.65 billion predicted.

• ServiceNow issued guidance for Q2 subscription revenues of between $3.815 billion and $3.820 billion, compared to the $3.75 billion FactSet consensus estimate.

• Non-GAAP gross margins declined to 79.5% from 80.5% in Q4.

ServiceNow shares have been at the epicenter of the software sell-off driven by the fear that such companies are at risk of being rendered obsolete by AI. The stock was down 33% for the year through the end of the New York trading session on Wednesday.

Big Blue fell in after-hours trading despite reporting better-than-expected Q1 results, as it didn’t include an internal metric it typically discloses to track the progress of its AI business in the release. IBM reported: 

• Q1 revenue of $15.92 billion vs. the $15.63 billion FactSet consensus estimate.

• Adjusted earnings per share of $1.91 vs. the $1.81 consensus expectation.

• Sales of $7.05 billion at its key, high-margin software segment vs. a $6.98 billion consensus of nine analyst estimates.

• Sales of $3.33 billion in its infrastructure unit, which houses its growing AI mainframe business, vs. a $3.13 billion consensus estimate.

Unlike recent earnings statements, the company made no mention of an internal metric it used to track its progress in AI, which it called its "generative AI book of business.” That metric stood at $12.5 billion at the end of 2025, per the company.

The infrastructure business is of acute interest to the market, after AI giant Anthropic announced in February that Claude Code could efficiently modernize code bases in the COBOL programming language, which serves as a cornerstone of IBM’s enterprise mainframe business. The language is still widely used in certain industries, such as airlines and finance. (ATMs, for instance, run almost entirely on COBOL.) 

Anthropic’s COBOL announcement cut the legs out from under IBM. The stock plunged 13% on February 23, the day of the announcement — its worst daily drop in more than 25 years. And it was down roughly 15% for the year through the end of trading Wednesday.

The iShares Semiconductor ETF took a brief leg lower after TSMC said that it would not deploy ASML’s most advanced machines for chipmaking through 2029 in a bid to save money.

Per Bloomberg, TSMC co-COO Kevin Zhang told reporters that ASML’s new offerings (high-NA EUV, for short) are “very, very expensive,” costing about $410 million.

Nonetheless, the Philadelphia Semiconductor Index, the basis for SOXX, is still poised to end the day by extending one record (for consecutive record closes) and setting another (for consecutive gains):

TSMC climbed to fresh highs after a brief blip. The foundry giant reported far better-than-expected profitability in its Q1 results last week, and delaying upgrading this equipment may be a sign of continued cost discipline to protect margins over time.

ASML fell as much as 4%, but pared losses to about 1% as of 3:19 p.m. ET.

Given TSMC’s stature in the industry, a couple thoughts:

a) You’d think TSMC would be the best place to absorb any short-term cash flow hits from buying this more expensive equipment.

b) It doesn’t seem like the outputs of ASML’s most advanced technology will be ubiquitous until TSMC adopts its machines, given how prominent the Taiwanese company is in the foundry world.