Tech & AI
ServiceNow raises its AI sales target as its bookings outlook disappoints
ServiceNow shares tumbled 26.9% after the company forecast slower growth in future bookings, a worry that a higher AI sales target could not offset.
Quick Read
- ServiceNow shares tumbled 26.9%, and the company lost $42 billion in market value.
- A forecast of slower growth in contracted future revenue outweighed a higher AI sales target.
- Revenue beat the average analyst forecast, but adjusted earnings fell slightly short as borrowing costs rose.
- Salesforce fell 4.6% and the technology sector fund slid 1.2% on the same day.
How far did ServiceNow shares fall?
ServiceNow stock fell 26.9% on Thursday and closed at $109.67. They had ended the prior session at $150.13.
Why it matters: The company lost $42 billion in market value, leaving it worth about $110 billion. Reports called it the steepest daily drop since the company went public. The stock now sits 41.3% below its 52-week high of $186.94.
Why did a higher AI target fail to lift the stock?
ServiceNow raised its target for yearly AI contract sales on Wednesday, its latest increase this year. It also reported fast growth in how much customers use its AI agents.
The problem sat in its guidance, the company's own forecast for coming results. ServiceNow expects slower growth in contracted revenue it plans to book over the coming year. That measure is called current remaining performance obligations, or cRPO. Investors treat it as the clearest signal of future sales.
The slowdown feeds a worry that has weighed on the stock all year. Some investors fear AI agents could reduce demand for software priced per user.
What did the latest quarter show?
Revenue grew from a year earlier and came in above the consensus, the average analyst forecast. Adjusted earnings per share landed slightly below estimates.
The company borrowed to pay for acquisitions this year, including cybersecurity firm Armis. That lifted its interest costs. Interest income fell at the same time as its cash balance shrank, according to the company's results.
Did other software stocks follow?
Salesforce (NYSE: CRM), another seller of business software, fell 4.6% on the same day. The technology sector fund slid 1.2%, and the Nasdaq-100 dropped 1.4%. The broader S&P 500 fell 0.3%.
The next broad checkpoints for tech stocks include the October jobs report on Nov. 6 and the October Consumer Price Index on Nov. 10. Both could shape views on interest rates.
For readers
What it could mean for you: People who own a technology or software sector fund may feel this story more than holders of broad index funds. Those funds concentrate on companies like ServiceNow and Salesforce, so a shift in how investors value software sales could move them sharply. The worry that AI agents may replace software priced per user could spread. If it does, other software makers' forecasts could face the same scrutiny when they report. Steadier bookings across the industry might ease that pressure.
Questions and answers
Why did ServiceNow stock fall?
The company forecast slower growth in contracted revenue it expects to book over the coming year. That outweighed a higher target for AI contract sales and fed fears that AI agents could cut demand for software priced per user.
What is cRPO at ServiceNow?
Current remaining performance obligations, or cRPO, is contracted revenue the company expects to recognize over the coming year. Investors treat it as the clearest read on future sales.
Did ServiceNow beat earnings estimates?
Revenue came in above the consensus forecast. Adjusted earnings per share were slightly below estimates, partly because interest costs rose after the company borrowed to fund acquisitions.
The numbers
| SERVICENOW (NOW) price | $109.67 |
|---|---|
| SERVICENOW (NOW) change | −26.95% |
| SERVICENOW (NOW) market value | $110 billion |
| SERVICENOW (NOW) 52-week high | $186.94 |
| Salesforce (CRM) price | $230.90 |
| Salesforce (CRM) change | −4.63% |
| Salesforce (CRM) market value | $190 billion |
| Salesforce (CRM) 52-week high | $266.23 |
| S&P 500 change | −0.30% |
| 10-year Treasury yield | 4.98% |
Thursday’s close
Companies in this story
Share this story
Not investment advice.
