ServiceNow stock plunges 27% after earnings, worst single-day performance since its IPO
ServiceNow shares fell 27% on Thursday, marking the worst single-day performance on record, after the company's third-quarter results fell short of expectations, reigniting market fears about AI disruption. Revenue for the quarter rose more than 20% year over year to $4.11 billion, roughly in line with LSEG analysts' expectation of $4.10 billion, but adjusted earnings per share of $1.00 came in below the $1.02 expected. Although the company slightly raised its full-year 2026 subscription revenue forecast to $15.78 billion to $15.79 billion, with net new AI average contract value growing 65%, Citi analyst Tyler Radke noted that the investment in its newly formed forward-deployed engineering team has yet to deliver immediate returns, and the market will have to wait until next year to see an inflection point.
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ServiceNow's record stock decline after earnings reflects growing market concerns that AI is disrupting traditional software business models.
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ServiceNow shares sank 27% on Thursday and recorded their worst day on record after the enterprise software company's third-quarter results underwhelmed, reigniting artificial intelligence disruption concerns.
"This was a little bit uncharacteristic for ServiceNow standards, just in terms of the lack of upside," Citi's Tyler Radke told CNBC on Thursday.
Revenue grew more than 20% during the period to $4.11 billion, which was roughly in line with a $4.10 billion estimate from analysts polled by LSEG. Adjusted earnings came up short at $1.00 per share, compared to a forecast of $1.02.
The results did little to overturn recent "SaaSpocalypse" fears, or concerns that new AI capabilities will upend traditional software business models.
The stock drop came even after the company slightly lifted its full-year 2026 subscription revenue outlook to between $15.78 billion and $15.79 billion. Net new AI average contract value jumped 65%.
One factor spooking investors is the lack of immediate payoff for the company's investments in its newly formed forward-deployed engineering team that embeds in enterprises to build AI solutions, Radke said.
"It's just going to be a little bit longer of a waiting game, and so I think the market, you know, wanted to see something a little bit sooner," he said. "I think you got to wait until next year to really see that inflection."
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