ServiceNow (NYSE:NOW) Shares Down 26.8% After Earnings Miss

Key Points

• ServiceNow shares plunged 26.8% to around $109 after adjusted EPS came in at $1.00, below the $1.02 consensus, despite revenue of $4.11 billion exceeding estimates and rising 20.5% year over year.
• Investors were particularly concerned by guidance for fourth-quarter contracted backlog growth of 18.5%, below projected revenue growth of 21.5%, signaling potential demand softness and increased AI-related disruption risk.
• The company raised its 2026 AI contract target to $1.7 billion and expanded its OpenAI partnership, while the analyst consensus remained “Moderate Buy” with an average price target of $154.50.

ServiceNow, Inc. (NYSE:NOW - Get Free Report)'s stock price dropped 26.8% on Thursday following a weaker than expected earnings announcement. The company traded as low as $108.68 and last traded at $109.8290. 75,432,001 shares were traded during mid-day trading, an increase of 249% from the average session volume of 21,594,254 shares. The stock had previously closed at $150.13.

The information technology services provider reported $1.00 EPS for the quarter, missing analysts' consensus estimates of $1.02 by ($0.02). The company had revenue of $4.11 billion during the quarter, compared to the consensus estimate of $4.09 billion. ServiceNow had a net margin of 11.34% and a return on equity of 16.45%. The company's quarterly revenue was up 20.5% on a year-over-year basis. During the same quarter last year, the firm posted $4.82 EPS.

Key Stories Impacting ServiceNow

Here are the key news stories impacting ServiceNow this week:

• Positive Sentiment: ServiceNow raised its 2026 artificial-intelligence contract target to $1.7 billion, while subscription revenue increased 20.5% year over year to $3.99 billion. The company also expanded its enterprise AI partnership with OpenAI, supporting AI agents, cybersecurity and governed workflows. ServiceNow: 3 Key Takeaways for Long-Term Investors
• Positive Sentiment: New commercial activity provided longer-term support, including a five-year HPE agreement to use ServiceNow for AI-powered support services and the launch of a Control Tower Alliance focused on enterprise AI adoption and governance. HPE selects ServiceNow to transform support services
• Positive Sentiment: Several analysts maintained bullish views after the selloff. Piper Sandler reaffirmed an overweight rating with a $175 target, while Oppenheimer maintained outperform with a $165 target. TD Cowen retained a buy rating despite lowering its target to $160. Piper Sandler ServiceNow rating
• Neutral Sentiment: Third-quarter revenue reached $4.11 billion, ahead of the $4.09 billion consensus, but adjusted EPS was $1.00 versus expectations of $1.02. Revenue growth remained strong, although profitability was pressured by acquisition-related costs. ServiceNow third-quarter earnings report
• Negative Sentiment: The main concern was guidance: fourth-quarter contracted backlog growth is expected to slow to 18.5%, below the 21.5% revenue-growth forecast. Because backlog is an indicator of future subscription revenue, investors viewed the deceleration as evidence of softer demand and greater AI-related disruption risk. ServiceNow guides to slower backlog growth
• Negative Sentiment: Analysts also lowered targets, including UBS to $140, BTIG Research to $150 and Wells Fargo to $175. Concerns about ServiceNow’s $7.52 billion debt load and rising interest costs added pressure to the stock’s valuation and financial-flexibility outlook. ServiceNow debt and interest costs

Wall Street Analyst Weigh In

A number of equities analysts recently issued reports on NOW shares. BMO Capital Markets increased their target price on ServiceNow from $115.00 to $118.00 and gave the stock an "outperform" rating in a report on Thursday, July 23rd. Canaccord Genuity Group set a $145.00 target price on shares of ServiceNow in a research report on Thursday. Cantor Fitzgerald boosted their target price on ServiceNow from $174.00 to $201.00 and gave the stock an "overweight" rating in a research note on Monday. Citigroup reduced their target price on ServiceNow from $170.00 to $157.00 and set a "buy" rating for the company in a report on Thursday. Finally, CLSA started coverage on ServiceNow in a research note on Monday, July 20th. They set an "underperform" rating and a $72.00 target price on the stock. One equities research analyst has rated the stock with a Strong Buy rating, thirty-six have assigned a Buy rating, three have assigned a Hold rating and three have assigned a Sell rating to the company's stock. According to MarketBeat, ServiceNow presently has a consensus rating of "Moderate Buy" and an average target price of $154.50.

Insider Activity

In related news, insider Paul Fipps sold 2,034 shares of the company's stock in a transaction that occurred on Monday, August 31st. The shares were sold at an average price of $147.87, for a total transaction of $300,767.58. Following the sale, the insider owned 18,305 shares of the company's stock, valued at approximately $2,706,760.35. This represents a 10.00% decrease in their position. The transaction was disclosed in a legal filing with the SEC, which is accessible through this hyperlink. Also, Director Paul Chamberlain sold 2,700 shares of the business's stock in a transaction on Thursday, August 27th. The shares were sold at an average price of $135.50, for a total transaction of $365,850.00. Following the transaction, the director owned 43,990 shares of the company's stock, valued at $5,960,645. This trade represents a 5.78% decrease in their ownership of the stock. The disclosure for this sale is available in the SEC filing. Over the last ninety days, insiders sold 14,081 shares of company stock worth $1,937,904. 0.34% of the stock is owned by company insiders.

Hedge Funds Weigh In On ServiceNow

Institutional investors and hedge funds have recently made changes to their positions in the business. Cornerstone Financial Management LLC increased its stake in shares of ServiceNow by 72.8% during the second quarter. Cornerstone Financial Management LLC now owns 254 shares of the information technology services provider's stock valued at $25,000 after buying an additional 107 shares during the period. Marquette Asset Management LLC lifted its stake in ServiceNow by 75.0% in the second quarter. Marquette Asset Management LLC now owns 301 shares of the information technology services provider's stock worth $30,000 after acquiring an additional 129 shares during the period. Kilter Group LLC purchased a new stake in ServiceNow in the second quarter worth about $31,000. Solstein Capital LLC bought a new position in ServiceNow during the 2nd quarter worth about $35,000. Finally, Main Street Group LTD bought a new position in ServiceNow during the 1st quarter worth about $40,000. Institutional investors own 87.18% of the company's stock.

ServiceNow Trading Down 26.8%

The company has a debt-to-equity ratio of 0.43, a quick ratio of 0.70 and a current ratio of 0.70. The company has a market capitalization of $113.56 billion, a P/E ratio of 68.64, a PEG ratio of 2.92 and a beta of 0.99. The company's fifty day simple moving average is $139.55 and its 200-day simple moving average is $115.79.

About ServiceNow

ServiceNow, Inc provides cloud-based software designed to help organizations digitize, automate and manage enterprise workflows. Its Now Platform connects people, processes and systems across departments, enabling customers to manage work through a centralized technology environment.

The company's products and services address a range of business needs, including information technology service management, IT operations management, customer service management, human resources service delivery, security operations, risk and compliance, and application development.

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