ServiceNow shares sank 24% on Thursday, putting the enterprise cloud software company on course for its worst trading day on record.
The decline followed third-quarter results that fell short of investor hopes despite revenue growing more than 20% to $4.11 billion, roughly matching a $4.10 billion analyst estimate polled by LSEG.
Adjusted earnings came in at $1.00 per share against a forecast of $1.02, ending a run of six consecutive quarterly earnings beats.
The shortfall was partly attributed to lower interest income and added debt costs tied to its acquisition of cybersecurity firm Armis earlier this year, which also helped push GAAP operating margin down to 9.5% from 17% a year earlier.
The bigger concern for investors was forward growth: contracted revenue due within 12 months rose 20.5% to $13.65 billion, but management guided to growth slowing to 18.5% in the fourth quarter, with subscription revenue guidance of $4.245 billion to $4.255 billion falling short of some market expectations.
ServiceNow raised 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%, with its 2026 AI contract-value target lifted to $1.7 billion from $1.5 billion in May.
Citi's Tyler Radke said the lack of upside was "uncharacteristic for ServiceNow standards," pointing to investor impatience with the company's forward-deployed engineering team built to embed AI solutions directly inside enterprises.
"I think you got to wait until next year to really see that inflection," he said.
