ServiceNow Shares Slide Despite Strong Quarterly Performance

In a striking market reaction, ServiceNow’s stock experienced significant downward pressure following the release of its fourth-quarter results. This occurred even as the company reported figures that surpassed expectations and raised its forward guidance, highlighting the current investor scrutiny on highly-valued software and artificial intelligence equities.

Financial Performance Exceeds Targets

For the quarter ending December 31, 2025, ServiceNow announced revenue of $3.57 billion, a figure that came in ahead of the analyst consensus estimate of approximately $3.53 billion. This represents a year-over-year increase of 20.7%. The company’s subscription revenue, a critical metric for its recurring business, climbed 21% to reach $3.47 billion.

Profitability metrics also outperformed. The adjusted earnings per share (EPS) stood at $0.92, beating the anticipated $0.89. Market observers paid particular attention to the current remaining performance obligations (cRPO), which reflects contracted revenue to be recognized over the next twelve months. This key indicator surged 25% to $12.85 billion.

Market Reaction and Contributing Factors

Despite this “beat and raise” scenario, the equity declined by double digits in post-earnings trading, closing Thursday’s session at $116.73. Several factors contributed to this negative response.

Valuation concerns were paramount. Following a substantial prior rally, expectations embedded in the share price were exceptionally high. In such an environment, even solidly exceeding forecasts can prove insufficient to justify the prevailing valuation multiples.

Sector-wide headwinds also played a role. Broad weakness across the software sector, with notable declines in peers like Microsoft and SAP, added to the selling pressure on ServiceNow.

Should investors sell immediately? Or is it worth buying ServiceNow?

Furthermore, the market parsed the company’s forward guidance with a critical eye. For the full year 2026, ServiceNow projected subscription revenue in the range of $15.53 billion to $15.57 billion. Some analysts noted that this outlook implies at least a modest deceleration in growth momentum, which provided a catalyst for profit-taking after the stock’s previous advance.

Strategic Initiatives and Outlook

In a move signaling confidence in its financial health and future, the company’s board authorized a new $5 billion share repurchase program.

From a strategic standpoint, management continues to emphasize its role as an enterprise “AI control tower.” CEO Bill McDermott pointed to robust demand for the “Now Assist” suite of products, noting that the annual contract value (ACV) for these generative AI solutions has seen significant expansion.

Looking ahead, investor focus will shift to operational execution. Key questions will center on the stability of profit margins—ServiceNow reported an operating margin of 31% for 2025—the reliability of large deal closures, and the duration of the current challenging sentiment within the software industry.

Summary of Key Financial Data:
– Q4 Revenue: $3.57 billion (+20.7%)
– Q4 Subscription Revenue: $3.47 billion (+21%)
– Adjusted EPS: $0.92
– cRPO: $12.85 billion (+25%)
– 2026 Subscription Revenue Guidance: $15.53 to $15.57 billion
– New Share Buyback Program: $5 billion