What Happened?
Shares of enterprise workflow automation company ServiceNow (NYSE:NOW) fell 11.4% in the afternoon session after the company reported fourth quarter earnings: Current RPO (remaining performance obligations) was just in line with expectations, and it only narrowly topped analysts' revenue expectations.
Also, while adjusted operating profit in the quarter beat and subscription revenue guidance was slightly ahead, the overall results were not convincingly ahead of Wall Street's estimates enough to ease fears that AI may be a net negative for the company. Looking forward, ServiceNow's guidance was anchored by expectations of continued AI adoption, product integration, and operational efficiencies. Management highlighted the company's evolving hybrid pricing model and the rapid expansion of its AI control tower and security capabilities as central to sustaining growth.
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 somewhat volatile and have had 10 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 6 days ago when the stock gained 3.5% on the news that it shook off broader market volatility as sentiment improved following the announcement of a significant expansion of its strategic partnership with OpenAI to integrate advanced "agentic AI" capabilities directly into its enterprise platform. The deal promised to move beyond simple chatbots, allowing AI agents to autonomously execute complex workflows across business systems. This announcement captured the attention of investors, placing the company at the forefront of the next generation of automated enterprise software.
ServiceNow is down 21.9% since the beginning of the year, and at $115.09 per share, it is trading 49.7% below its 52-week high of $228.73 from January 2025. Investors who bought $1,000 worth of ServiceNow’s shares 5 years ago would now be looking at an investment worth $1,060.
The 1999 book Gorilla Game predicted Microsoft and Apple would dominate tech before it happened. Its thesis? Identify the platform winners early. Today, enterprise software companies embedding generative AI are becoming the new gorillas. Click here for access to our special report that reveals one profitable leader already riding this wave, it’s free.