ServiceNow Stock Plunges on Slowing Subscription Revenue Growth Forecast

KEY TAKEAWAYS

Shares of ServiceNow (

NOW

) are tanking 9% in premarket trading Thursday, as the software and IT services provider posted slower subscription revenue growth than it had forecast earlier and projected a slight decline in first-quarter growth.

The company forecast first quarter 2025 subscription revenue of between $2.995 billion and $3 billion, an 18.5%-19% rise year-over-year.

That came after ServiceNow said fourth-quarter subscription revenue gained between 21% to $2.87 billion, below its own forecast laid out during the
third quarter
of between 21.5% and 22% year-over-year growth. The fourth-quarter subscription revenue also trailed the $2.88 billion consensus estimate by analysts polled by Visible Alpha.

CEO McDermott Sees Huge Gains from AI Demand

Otherwise, results for the fourth quarter were mixed. Fourth-quarter revenue of $2.96 billion — in line with estimates from analysts polled by Visible Alpha—marked a 21% year-over-year surge. Fourth-quarter adjusted
earnings per share (EPS)
of $3.67 also beat estimates of $3.65.

The company was optimistic about the prospects for its
artificial intelligence (AI)
platform, with
Chief Executive Officer (CEO)
Bill McDermott saying that the emerging technology “is fueling a top to bottom re‑ordering of the enterprise technology landscape.”

ServiceNow said it now has almost 500 clients with contracts of $5 million in value, or annual contract value, per year. ServiceNow shares are up around 50% in the past year through Wednesday.

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