ServiceNow shares drop 18% after mixed earnings results

Shares of ServiceNow Inc. experienced an 18% drop in after-hours trading following the release of mixed quarterly results. While the company exceeded its internal guidance, it fell short of analysts' expectations. ServiceNow, known for its ITSM platform, offers various products that simplify tasks like managing customer data and creating AI agents.

The company earned $1.04 billion in adjusted operating income for the third quarter, resulting in $1 per share in adjusted earnings. Analysts projected $1.02 per share. Revenue grew 20.5% year-over-year to $4.11 billion, surpassing the consensus estimate by $20 million. This growth was fueled by large customer deals, with 19 deals valued over $5 million, a 135% increase from the previous year.

CEO Bill McDermott noted a 65% year-over-year increase in AI product net new ACV. Key AI initiatives include EmployeeWorks, an employee portal, and Super Intelligence Control Tower, a platform that safeguards AI assets. EmployeeWorks reached $100 million in ACV within three quarters of its launch. Super Intelligence Control Tower's usage metric grew by 500% month-over-month, and the software expects "true acceleration" in AI business next year.

The company raised its full-year AI ACV projection to $1.7 billion, a 70% increase from January. Despite this, the fourth-quarter revenue forecast was below expectations, with projections of $4.25 billion to $4.26 billion compared to analyst estimates of $4.36 billion. ServiceNow announced AI partnerships with OpenAI Group PBC and Nvidia Corp., focusing on expanding AI capabilities and go-to-market strategies.