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ServiceNow Shares Drop 27% After Q3 Earnings Miss, Raising AI Disruption Concerns
Key points
- ServiceNow shares dropped 27% after Q3 earnings.
- Q3 revenue was $4.11 billion, meeting estimates.
- Adjusted earnings were $1.00 per share, below $1.02 forecast.
- AI disruption fears resurfaced among investors.
ServiceNow Stock Plunges Post-Earnings
ServiceNow shares experienced a 27% decline on Thursday, marking its worst single-day performance on record. This significant drop followed the release of the company's third-quarter financial results, which underperformed investor expectations.
The market reaction indicates renewed concerns among investors regarding the potential for artificial intelligence to disrupt established software business models, a sentiment referred to as "SaaSpocalypse" fears.
Financial Performance Details
For the third quarter, ServiceNow reported revenue of $4.11 billion, which was consistent with the $4.10 billion estimate from analysts polled by LSEG. However, adjusted earnings per share came in at $1.00, missing the forecast of $1.02 per share.
This earnings miss occurred despite the company's announcement that it had slightly increased its full-year 2026 subscription revenue outlook to a range of $15.78 billion to $15.79 billion. Additionally, net new AI average contract value saw a 65% increase.
Investor Concerns Regarding AI Investments
A contributing factor to investor apprehension is the perceived lack of immediate returns from ServiceNow's investments in its newly formed forward-deployed engineering team. This team is tasked with embedding within enterprises to develop AI solutions.
According to Citi's Tyler Radke, the market is anticipating a longer waiting period for these AI investments to yield significant results, with a more substantial impact expected in the next year.
✨ This summary was generated by AI from the outlets' reporting listed below. It is not independently verified and may contain errors — check the original sources. How BrevFeed works →
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Reporting from
ServiceNow's shares fell 27% after its third-quarter results, with revenue of $4.11 billion meeting estimates but adjusted earnings of $1.00 per share falling short of the $1.02 forecast. This performance reignited investor concerns about AI's potential disruption to traditional software business models, despite the company slightly raising its full-year 2026 subscription revenue outlook.