ServiceNow falls 12% as full-year subscription revenue guidance disappoints
Investing.com -- ServiceNow Inc (NYSE: NOW) reported first-quarter results that met analyst expectations but tumbled 12.9% in after-hours trading on Wednesday after issuing full-year subscription revenue guidance that appeared to disappoint investors.
The enterprise software company posted adjusted earnings per share of $0.97 for the first quarter, matching analyst estimates. Revenue reached $3.77 billion, slightly above the $3.75 billion consensus and representing 22% growth YoY. The company issued full-year subscription guidance of $15.735 billion to $15.775 billion, up from the prior guidance of $15.53-$15.57 billion, but not enough to soothe investors’ fears of a slowdown due to AI competition.
ServiceNow stock has been battered by AI fears in the software sector, dropping approximately 22% over the past 3 months. The decline mirrors a broader repricing across the industry, which has also pulled down peers like Salesforce and SAP this year as investors worry that automated AI agents will disrupt traditional software growth. Salesforce Inc (NYSE: CRM) stock dropped by around 5% after-hours in sympathy with ServiceNow.
Subscription revenues totaled $3.67 billion in the quarter, up 22% YoY and 19% in constant currency. The company noted that first-quarter subscription revenue growth faced approximately 75 basis points of headwind from delayed closings of several large on-premise deals in the Middle East due to ongoing regional conflict.
"ServiceNow’s first quarter performance beat the high end of our guidance once again," said Chairman and CEO Bill McDermott. "Since our founding, we’ve built our platform around the work customers need to accomplish. Today, they rely on ServiceNow to be their AI control tower for business reinvention."
Coinciding with the release, the company unveiled a deepened partnership with Google Cloud at Google Cloud Next. The collaboration introduces a shared interoperability framework where AI agents across Google Gemini’s Enterprise platform and the ServiceNow AI Platform work as one autonomous chain across 5G networking, retail, and IT systems. This "agent-to-agent" architecture aims to allow AI workforces to detect, diagnose, and resolve enterprise issues autonomously.
Current remaining performance obligations reached $12.64 billion, representing 22.5% YoY growth and 21% in constant currency. The company closed 16 transactions over $5 million in net new annual contract value during the quarter, representing nearly 80% YoY growth.
ServiceNow closed its acquisition of Armis on April 20, which is expected to contribute approximately 125 basis points to second-quarter and full-year subscription revenue growth. However, the acquisition is projected to create near-term margin headwinds.
For the second quarter, ServiceNow expects subscription revenues of $3.815 billion to $3.820 billion, representing 21% to 21.5% growth in constant currency.