Why ServiceNow Stock Plunged This Week

ServiceNow's stock price dropped 31% this week, despite the company raising full-year AI revenue targets. The decline came after a disappointing forecast for fourth-quarter current backlog growth was announced through Oct. 29, 2026. The stock closed at $109.67 on Thursday, down from $150.06 on Oct. 23, with the S&P 500 and Nasdaq-100 both experiencing gains of 1.3% and 1.5% respectively.

In its latest financial results, ServiceNow reported $4.1 billion in total revenue, up 20.5% year-over-year, but adjusted earnings per share fell short of the $1.02 consensus estimate. The company's cloud software automates workflows to streamline tasks for large clients managing internal software tickets and complex workflows. While management pointed to an impressive 8.5-fold increase in customer deals encompassing five or more AI products, the market remained focused on the guidance indicating current backlog growth would be lower than expected.

This shift in focus from AI momentum to enterprise workflow platforms' long-term growth potential has investors questioning whether ServiceNow can maintain robust earnings growth. With a trailing P/E ratio of 79, which is at the high end of its peer range, the current valuation places heavy emphasis on ServiceNow delivering strong earnings growth.

Investors are advised to watch the upcoming fourth-quarter earnings release in January to determine whether current backlog growth stabilizes and if new AI bundling strategies convert into durable subscription revenue.