ServiceNow Posts Strong Quarter, But Investors Send Shares Lower on AI and Acquisition Concerns

ServiceNow reported fourth-quarter financial results that exceeded analyst projections on Tuesday, but its stock fell sharply in after-hours trading, highlighting investor skittishness around the company's aggressive spending and the broader impact of artificial intelligence on the software sector. The company posted adjusted earnings of 92 cents per share on revenue of $3. 57 billion, a 20. 5% year-over-year increase, both figures coming in above Wall Street forecasts.

Subscription revenue, its primary business, grew 21% to $3. 47 billion. For the full 2025 fiscal year, subscription revenue reached $12. 88 billion.

The company also reported a 25% jump in current remaining performance obligations, a key indicator of future revenue, to $12. 85 billion. Chief Financial Officer Gina Mastantuono pointed to the results as evidence of the company's durable strength. Looking ahead, ServiceNow provided guidance for 2026 that surpassed expectations, projecting subscription revenue between $15.

53 billion and $15. 57 billion, which would represent growth of 20% to 21%. The company also announced its board authorized an additional $5 billion for share repurchases. Despite these strong fundamentals, shares dropped more than 6% after the bell.

The decline reflects broader pressures on enterprise software stocks and specific concerns about ServiceNow's strategy. The company has embarked on a major acquisition push, including the recently closed purchase of AI specialist Moveworks for nearly $3 billion and the announced $7. 75 billion acquisition of cybersecurity firm Armis. While CEO Bill McDermott and Mastantuono frame these deals as accelerants to organic growth, some investors appear wary of integration risks and the high price tags.

Furthermore, the market is reassessing how AI will reshape software economics, creating uncertainty even for companies, like ServiceNow, that are actively embedding the technology into their platforms. The company has expanded AI partnerships with Anthropic and OpenAI and reports strong demand for its Now Assist AI product. Yet, after a 40% decline in its share price over the past year, the post-earnings selloff suggests investors are demanding clear proof that these costly bets will pay off in an increasingly competitive and uncertain environment.

Source: Webpronews