ServiceNow shares slide as earnings miss eclipses higher AI outlook

ServiceNow’s shares declined after its latest earnings results failed to overcome skepticism toward software stocks, despite the company lifting its outlook for AI. The report also pointed to an uptick in multimillion-dollar AI deals, making the reaction a comparison between improving commercial traction and disappointing earnings execution.

The result follows a period in which AI expectations have raised the bar for software companies: stronger deal activity is being judged against the pace and quality of reported earnings, rather than in isolation. ServiceNow’s FY2025 figures provide older context, with $13.3 billion of revenue, 20.9% year-over-year growth, a 77.5% gross margin and a 13.2% net margin.

The company is the direct link between the news and those figures. Its AI outlook and multimillion-dollar contracts affect the potential expansion of its software business, while the earnings miss challenges the market’s assessment of how quickly that opportunity is translating into results.

The reporting leaves the balance between the raised AI outlook and the earnings miss unresolved. The stock reaction shows that the stronger AI outlook did not outweigh the immediate concern over earnings for software skeptics.

The next focus is ServiceNow’s subsequent quarterly results and whether AI deal growth converts into reported revenue and earnings. Investors will also look for the company to sustain the higher AI outlook while improving delivery against the expectations that accompanied it.