ServiceNow’s Earnings Beat Masks Investor AI Jitters as Shares Tumble 6%

ServiceNow Inc. delivered fourth-quarter results that surpassed Wall Street expectations on Tuesday, yet its shares plunged more than 6% in after-hours trading, reflecting broader unease in enterprise software amid concerns over artificial intelligence disruption and acquisition integration risks. The cloud-based workflow automation giant reported adjusted earnings per share of 92 cents, topping the LSEG consensus of 88 cents, while revenue climbed 20.5% to $3.57 billion against estimates of $3.53 billion, according to CNBC.

Subscription revenues, which comprise the bulk of sales, rose 21% to $3.47 billion, exceeding StreetAccount forecasts of $3.42 billion. For full fiscal 2025, subscription growth hit 21% at $12.88 billion. Current remaining performance obligations surged 25% to $12.85 billion, signaling robust future revenue visibility. Finance chief Gina Mastantuono emphasized the company’s resilience, stating, “Hopefully these results continue to demonstrate the fact that the strength of our business really is unwavering, and we’re truly a one-of-one company in the software space,” as quoted by CNBC.

Guidance Signals Steady Growth Amid AI Push

ServiceNow projected first-quarter subscription revenue between $3.65 billion and $3.66 billion, and full-year 2026 between $15.53 billion and $15.57 billion, both above analyst estimates of roughly $15.21 billion, per Reuters. The 2026 outlook implies 20%-21% growth. Moveworks acquisition is set to add 100 basis points to full-year and Q1 subscription growth, plus Q1 cRPO expansion. Net income reached $401 million, or 38 cents per share, up from $384 million a year earlier.

CEO Bill McDermott highlighted AI momentum, noting Now Assist more than doubled net new annual contract value in Q4. The board authorized an additional $5 billion share repurchase, with a $2 billion accelerated buyback imminent. Expanded partnerships with Anthropic for Claude models and a three-year OpenAI deal underscore ServiceNow’s positioning as an “AI control tower” for enterprises, integrating governance, security, and workflows.

Mega-Acquisitions Fuel Capabilities, Spark Skepticism

Recent deals define ServiceNow’s strategy: closing the nearly $3 billion Moveworks AI purchase, announcing $7.75 billion Armis cybersecurity buy, and Veza identity security platform. Mastantuono defended the spree, saying, “Our acquisitions are 100% not a pivot away from organic growth… They represent an acceleration of it,” per CNBC. These moves aim to embed AI and security deeply into workflows, targeting Fortune 500 needs for deterministic outcomes over raw large language models.

McDermott told Fortune, “We don’t live in the SaaS neighborhood,” distancing from peers like Salesforce amid valuation scrutiny. ServiceNow’s trailing P/E exceeds twice some rivals, contributing to a 40% stock decline over the past year despite consistent beats—ninth straight quarter topping estimates.

Selloff Echoes Sector Pressures

X posts captured trader frustration: GenZ Investor noted, “$NOW is down over 6% in after-hours trading despite… a strong report and upbeat guidance,” attributing it to elevated valuations, M&A risks, and AI agent fears compressing software economics. StockStormX highlighted beats and $5 billion buyback, yet shares fell. ilikedetails called the dip “noise,” praising 25% cRPO acceleration as flywheel proof.

Broader enterprise software faces headwinds: peers down 6.8% pre-earnings, per Yahoo Finance. Investors demand acceleration, not resilience, amid AI disruption worries. ServiceNow’s federal growth exceeded 30% net new ACV recently, countering budget fears, but on-prem dynamics and dollar strength linger as drags in prior quarters.

Analyst Views and Valuation Reckoning

Fortune reported shares down 4% after hours despite raised 2026 guidance well above 18%-18.5% expectations. Reuters noted strong AI demand signaling. X chatter suggests rotation to high-flyers like Meta and Tesla, with Jim Cramer eyeing Microsoft and Meta calls for software cues. Canaccord Genuity hiked targets post-prior prints, viewing positioning as strong, though 2025 analogs showed drops on “lackluster” outlooks.

ServiceNow’s platform unifies legacy systems, cloud apps, and AI agents, boasting 8,500 customers versus 50,000 potential. Now Assist deals grew over 150% quarter-over-quarter pre-Moveworks. cRPO outpacing revenue indicates expanding moat, but market fixates on organic purity amid $10+ billion M&A spend.

Enterprise AI Frontier Beckons

McDermott envisions consolidating “feature” and “function” SaaS onto ServiceNow, automating via workflows. Partnerships with Cisco for AI Defense integration enhance governance. Federal dynamics persist—Q3 2025 saw 30% growth—but execution risks from acquisitions and macro volatility test investor patience. With free cash flow margins historically strong and buybacks bolstering EPS, fundamentals shine, yet sentiment demands proof of AI monetization at scale.

The after-hours plunge, despite beats and raises, underscores a market recalibrating software multiples. ServiceNow’s bet on agentic AI orchestration positions it uniquely, but integration success and consumption pricing shifts will dictate if shares rebound or extend the slump.