What happened?
Shares of enterprise workflow automation company ServiceNow (NYSE:NOW) fell 26.3% in the afternoon session after the company forecast fourth-quarter current remaining performance obligations growth to decelerate to 18.5%, reigniting concerns regarding artificial intelligence disruption.
According to a company press release, ServiceNow reported third-quarter revenue of $4.11 billion, up 20.5% year on year, and adjusted earnings per share of $1.
Revenue was broadly in line with Wall Street expectations. Subscription revenue was $3.99 billion, just $11.4 million above consensus, although a shift of some revenue to services reduced reported growth by 25 basis points. Adjusted earnings per share was below consensus, while non-GAAP operating income came in above expectations at $1.34 billion, with a 32.5% operating margin versus the Street’s 31.1% estimate. Billings reached $3.64 billion at quarter end, up 23.2% year on year.
Management's outlook for current remaining performance obligations, or cRPO, disappointed investors despite stronger-than-expected third-quarter results. Third-quarter cRPO rose 20.5% to $13.65 billion, above analysts’ expectations of about $13.57 billion. Total RPO was $29.7 billion, also ahead of consensus.
The next-quarter cRPO outlook was light. Management cited roughly 100 basis points of combined headwind from the shift of some revenue to services and a higher mix of contracts with termination-for-convenience clauses.
The market is increasingly skeptical of ServiceNow’s exposure to AI-driven disintermediation, so even modest blemishes in its results can trigger an outsized negative stock reaction.
The stock market overreacts to news, and big price drops can present good opportunities to buy high-quality stocks. Is now the time to buy ServiceNow? Access our full analysis report here, it’s free.
What is the market telling us
ServiceNow’s shares are extremely volatile and have had 38 moves greater than 5% over the last year. But moves this big are rare even for ServiceNow and indicate this news significantly impacted the market’s perception of the business.
The previous big move we wrote about was 14 days ago when the stock gained 5.1% on the news that a company press release detailed updates to ServiceNow EmployeeWorks to allow workers to build artificial intelligence agents without code. As detailed in the release, this represents the third generation of the company's employee-centric artificial intelligence harness. The company stated that the updates give employees the ability to customize AI agents without writing code to complete daily tasks and support persona-based work.
ServiceNow is down 25.1% since the beginning of the year, and at $110.51 per share, it is trading 40.9% below its 52-week high of $186.94 from October 2025. Investors who bought $1,000 worth of ServiceNow’s shares 5 years ago would now be looking at only $791.91.
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