ServiceNow shares sink 27% in record worst day as Q3 results revive AI disruption fears
The enterprise software company beat revenue expectations but missed on adjusted earnings, reigniting fears that AI will upend traditional software business models.
At a glance
- ServiceNow shares sank 27% on Thursday, their worst day on record, after third-quarter results underwhelmed.
- Revenue rose more than 20% to $4.11 billion, roughly in line with estimates, but adjusted earnings of $1.00 per share missed the $1.02 forecast.
- Citi's Tyler Radke said investors want a faster payoff from ServiceNow's forward-deployed engineering team and may wait until next year for an inflection.
ServiceNow shares fell 27% on Thursday, the enterprise software company's worst single day on record, after third-quarter results underwhelmed and revived concerns about artificial intelligence disrupting established software business models.
Revenue rose more than 20% in the period to $4.11 billion, roughly matching the $4.10 billion estimate from analysts polled by LSEG. Adjusted earnings came in short at $1.00 per share against a forecast of $1.02.
The company, led by CEO Bill McDermott, still slightly raised its full-year 2026 subscription revenue outlook to between $15.78 billion and $15.79 billion. Net new AI average contract value jumped 65%.
Investors wanted a faster payoff
Citi's Tyler Radke told CNBC the quarter was "a little bit uncharacteristic for ServiceNow standards, just in terms of the lack of upside."
One factor unsettling investors, Radke said, is the lack of an immediate return on the company's investment in its newly formed forward-deployed engineering team, which embeds staff inside enterprises to build AI solutions.
"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."
"SaaSpocalypse" fears persist
The results did little to overturn recent "SaaSpocalypse" fears — worries that new AI capabilities will upend the way traditional software companies sell and deliver their products.
The selloff came despite the raised subscription outlook and the growth in AI contract value, suggesting investors are focused on the pace of AI-related revenue rather than the company's current headline numbers.
The scale of the decline made it ServiceNow's worst trading day since the company listed, according to CNBC.
Source: CNBC Top News.
Questions and answers
- Why did ServiceNow shares drop so sharply?
- Third-quarter results underwhelmed, with adjusted earnings of $1.00 per share below the $1.02 forecast, reigniting "SaaSpocalypse" fears that AI will disrupt traditional software business models.
- What were ServiceNow's third-quarter revenue and earnings?
- Revenue grew more than 20% to $4.11 billion, roughly in line with the $4.10 billion analyst estimate, while adjusted earnings came in at $1.00 per share against a $1.02 forecast.
- Did ServiceNow raise its outlook despite the selloff?
- Yes. The company slightly lifted its full-year 2026 subscription revenue outlook to between $15.78 billion and $15.79 billion, and net new AI average contract value jumped 65%.
