ServiceNow Shares Plummet 24% Over AI Return Concerns
ServiceNow shares suffered their worst single-day drop after third-quarter earnings failed to convince investors of the immediate financial payoff from artificial intelligence investments.
Shares of ServiceNow Inc. plummeted 24% on Thursday, marking the company's worst single-day performance. The decline followed the release of third-quarter earnings and a quarterly sales outlook that failed to alleviate investor fears regarding artificial intelligence disruption.
Financial results showed revenue grew over 20% to $4.11 billion, meeting analyst estimates. However, adjusted earnings of $1.00 per share fell short of the $1.02 forecast. The company projected subscription revenue growth of up to 23% for the period ending in December and a slight increase in the full-year 2026 subscription revenue outlook. Current remaining performance obligations were projected to expand by more than 18%, slightly below the analyst average of 19%.
Despite a 65% jump in net new AI average contract value, investors reacted negatively to the lack of immediate financial returns from a new forward-deployed engineering team that embeds within enterprises to develop AI solutions. Analysts suggest the market expected a faster payoff from these AI investments, with a potential inflection point not expected until next year.
