ServiceNow (NOW) Stock Dips 12% Amid Slower Revenue Growth Forecast, But CEO Optimistic About AI Prospects

ServiceNow Faces Setback as Q4 Revenue Misses Estimates; AI Optimism Remains High

Shares of ServiceNow (NOW) took a significant hit on Thursday, plunging 12% in intraday trading after the company reported slower-than-expected subscription revenue growth. The software and IT services provider’s Q4 subscription revenue growth came in below its earlier forecasts, and its Q1 2025 revenue outlook is now projecting a slight decline in growth compared to previous expectations.

ServiceNow’s Q4 Misses Expectations

ServiceNow’s fourth-quarter subscription revenue gained 21%, reaching $2.87 billion. While this still represents growth, it fell short of the company’s own forecast of 21.5% to 22% growth year-over-year. Additionally, it also missed the $2.88 billion consensus estimate by analysts polled by Visible Alpha.

The company’s Q1 2025 forecast for subscription revenue is between $2.995 billion and $3 billion, which represents a 19% year-over-year growth, slightly below the prior forecast of 19.5%.

Despite these revenue setbacks, ServiceNow’s Q4 revenue of $2.96 billion was in line with analyst expectations, showing a 21% year-over-year increase. The company also reported adjusted earnings per share (EPS) of $3.67, slightly beating analyst estimates of $3.65.

AI Demand Fuels Optimism

Despite the short-term challenges, ServiceNow CEO Bill McDermott remains optimistic about the company’s future growth, especially in the rapidly expanding field of artificial intelligence (AI). McDermott noted that AI is driving a significant “top-to-bottom re-ordering” of the enterprise technology landscape, which is expected to yield substantial growth opportunities for the company.

ServiceNow has capitalized on the growing demand for AI, reporting nearly 500 clients with contracts valued at $5 million or more annually. The company believes that AI will play a central role in its growth moving forward, helping to propel ServiceNow into new areas of enterprise technology solutions.

What’s Next for ServiceNow?

While ServiceNow’s subscription revenue growth may have missed expectations for the fourth quarter, the company’s ability to tap into AI remains a bright spot. Investors are watching closely to see how AI innovations can contribute to long-term growth and whether the company can meet its revenue expectations for the first quarter of 2025. With a 28% stock price increase over the past year, ServiceNow future in the AI-driven enterprise sector remains promising, but the company must address the short-term revenue growth challenges to regain investor confidence.

Stay tuned for more updates on ServiceNow’s performance as the company continues to explore the potential of AI technology to shape the future of business solutions.