ServiceNow Shares Fall 27% in Worst Day on Record After Slower Contract Growth Forecast
ServiceNow closed down 27% at $109.67 on October 29, its worst day since it began trading in 2012, after third-quarter earnings missed expectations and the company forecast contracted revenue growth slowing to 18.5% in the fourth quarter.
ServiceNow shares fell 27% on Thursday to close at $109.67, the worst day for the stock since it began trading in 2012, after the software company reported third-quarter earnings below expectations and forecast slower growth in contracted revenue.
The company reported adjusted earnings of $1.00 a share for the third quarter, against $1.02 expected by analysts. Revenue rose 20.5% from a year earlier to $4.11 billion, above expectations, and subscription revenue rose 21% to $3.988 billion.
A miss on earnings and a slower outlook
The drop came from the outlook for current remaining performance obligations, the contracted revenue ServiceNow expects to recognize over the next 12 months. The company forecast growth of 18.5% in constant currency for the fourth quarter, down from 21% in the third quarter.
ServiceNow was the worst performer in the S&P 500 on Thursday, Barron’s reported, citing Dow Jones Market Data. Shares traded as low as $108.68 during the session, down 27.6% at that point, the largest intraday percentage drop on record for the stock.
On the earnings call, President and Chief Financial Officer Gina Mastantuono said strong early renewals in the third quarter contributed about half of that quarter’s beat and pulled deals out of the fourth quarter. She also cited a higher share of on-premises deals, in which customers run software on their own servers.
Analysts cut targets as AI questions remain
Morgan Stanley analyst Adam Wood said the slower contracted revenue growth suggests that AI adoption is not yet translating into better growth for the overall business. Truist Securities cut its price target to $150 from $180 and kept a Buy rating, while Morgan Stanley cut its target to $160 from $180 and kept an Overweight rating.
ServiceNow raised its 2026 target for annual contract value from AI products to $1.7 billion, up from $1.0 billion at the start of the year. The company also raised its full-year subscription revenue forecast to between $15.78 billion and $15.79 billion.
The stock is down 28.4% this year and down 41.3% over the past 12 months, according to Barron’s.
Reporting based on coverage by Barron’s and AIStockWire.
