ServiceNow (NYSE:NOW) Shares Gap Down Following Weak Earnings

Key Points

• ServiceNow shares plunged 24.4%, opening at $120.91 after closing at $150.13, following disappointing earnings and weaker-than-expected fourth-quarter guidance.
• Third-quarter revenue rose 20.5% year over year to $4.11 billion and subscription revenue increased 21%, but adjusted earnings of $1.00 per share missed the $1.02 consensus estimate and ended a six-quarter streak of earnings beats.
• Despite investor concerns about valuation, demand and AI monetization, ServiceNow continues expanding AI partnerships with OpenAI and HPE; analyst views remain mixed, with a consensus “Moderate Buy” rating and a $155.90 price target.

ServiceNow, Inc. (NYSE:NOW - Get Free Report)'s share price gapped down prior to trading on Thursday following a weaker than expected earnings announcement. The stock had previously closed at $150.13, but opened at $120.91. ServiceNow shares last traded at $114.3970, with a volume of 15,151,870 shares trading hands.

The information technology services provider reported $1.00 earnings per share for the quarter, missing the consensus estimate of $1.02 by ($0.02). ServiceNow had a return on equity of 16.45% and a net margin of 11.34%. The business had revenue of $4.11 billion for the quarter, compared to analysts' expectations of $4.09 billion. During the same quarter last year, the firm earned $4.82 earnings per share. The firm's quarterly revenue was up 20.5% compared to the same quarter last year.

ServiceNow News Roundup

Here are the key news stories impacting ServiceNow this week:

• Positive Sentiment: Revenue and subscription growth remained strong. Third-quarter revenue rose 20.5% year over year to $4.11 billion, exceeding the $4.09 billion consensus estimate. Subscription revenue increased 21% to $3.99 billion. ServiceNow Reports Third Quarter 2026 Financial Results
• Positive Sentiment: AI partnerships and customer adoption support the long-term story. ServiceNow expanded its partnership with OpenAI to connect AI reasoning with governed enterprise workflows, cybersecurity and agentic development. HPE also selected ServiceNow for a five-year, AI-powered support-services agreement. ServiceNow and OpenAI Partnership
• Positive Sentiment: Some analysts see substantial upside. Piper Sandler reaffirmed its overweight rating with a $175 price target, while JPMorgan and another prominent Wall Street firm reportedly see meaningful appreciation potential if ServiceNow’s AI monetization accelerates. MarketWatch Analyst Commentary
• Neutral Sentiment: New AI initiatives have not yet resolved investor skepticism. ServiceNow launched a Control Tower Alliance with companies including Anthropic, AWS and Cisco to help enterprises deploy AI safely, but investors remain focused on measurable revenue and backlog acceleration. ServiceNow Control Tower Alliance
• Negative Sentiment: Earnings and guidance disappointed. Adjusted earnings of $1.00 per share missed the $1.02 consensus estimate, ending a six-quarter earnings-beat streak. Fourth-quarter revenue guidance reportedly came in below Wall Street expectations, intensifying concerns about slowing demand and backlog growth. ServiceNow Shares Sink on Earnings Miss and Weak Outlook
• Negative Sentiment: Valuation and sector fears amplify the reaction. With ServiceNow trading at a high earnings multiple, investors are demanding stronger evidence that AI will accelerate—not cannibalize—software revenue. The selloff also pressured software-focused ETFs and other technology stocks. ServiceNow Weak Forecast and Wall Street Reaction

Wall Street Analyst Weigh In

A number of research analysts recently weighed in on NOW shares. Zacks Research lowered shares of ServiceNow from a "hold" rating to a "strong sell" rating in a research note on Monday, October 19th. Weiss Ratings raised ServiceNow from a "hold (c-)" rating to a "hold (c)" rating in a research note on Thursday, October 8th. CLSA initiated coverage on shares of ServiceNow in a research note on Monday, July 20th. They set an "underperform" rating and a $72.00 price objective for the company. Barclays set a $152.00 price objective on shares of ServiceNow in a report on Thursday. Finally, Citigroup reaffirmed a "buy" rating and issued a $170.00 price target (up from $154.00) on shares of ServiceNow in a research note on Wednesday, October 14th. One research analyst has rated the stock with a Strong Buy rating, thirty-six have assigned a Buy rating, two have assigned a Hold rating and four have assigned a Sell rating to the company's stock. According to MarketBeat, the stock has a consensus rating of "Moderate Buy" and a consensus price target of $155.90.

Insider Buying and Selling

In related news, Director Paul Chamberlain sold 2,700 shares of ServiceNow stock in a transaction on Thursday, August 27th. The shares were sold at an average price of $135.50, for a total value of $365,850.00. Following the transaction, the director directly owned 43,990 shares in the company, valued at $5,960,645. This trade represents a 5.78% decrease in their position. The transaction was disclosed in a filing with the SEC, which is available at the SEC website. Also, insider Jacqueline Canney sold 7,847 shares of the stock in a transaction dated Friday, August 28th. The shares were sold at an average price of $138.00, for a total transaction of $1,082,886.00. Following the completion of the transaction, the insider directly owned 30,042 shares of the company's stock, valued at approximately $4,145,796. This trade represents a 20.71% decrease in their ownership of the stock. Additional details regarding this sale are available in the official SEC disclosure. The transaction was executed under a pre-arranged Rule 10b5-1 trading plan. Insiders sold a total of 14,081 shares of company stock worth $1,937,904 in the last 90 days. Company insiders own 0.34% of the company's stock.

Hedge Funds Weigh In On ServiceNow

A number of institutional investors and hedge funds have recently bought and sold shares of NOW. Columbia Bank lifted its stake in ServiceNow by 9.5% in the third quarter. Columbia Bank now owns 18,670 shares of the information technology services provider's stock worth $2,502,000 after purchasing an additional 1,612 shares during the last quarter. Mirae Asset Global Investments Co. Ltd. purchased a new stake in shares of ServiceNow in the third quarter worth approximately $65,477,000. ProShare Advisors LLC lifted its stake in shares of ServiceNow by 1.0% during the 3rd quarter. ProShare Advisors LLC now owns 197,106 shares of the information technology services provider's stock worth $26,414,000 after acquiring an additional 1,964 shares during the last quarter. Vise Technologies Inc. boosted its stake in shares of ServiceNow by 26.1% during the third quarter. Vise Technologies Inc. now owns 52,722 shares of the information technology services provider's stock valued at $7,065,000 after purchasing an additional 10,898 shares during the period. Finally, Investment Partners LTD. bought a new position in shares of ServiceNow in the third quarter worth about $268,000. Hedge funds and other institutional investors own 87.18% of the company's stock.

ServiceNow Stock Down 24.4%

The company's 50 day moving average is $139.55 and its 200 day moving average is $115.79. The company has a current ratio of 0.70, a quick ratio of 0.70 and a debt-to-equity ratio of 0.43. The company has a market cap of $117.43 billion, a PE ratio of 70.97, a P/E/G ratio of 2.92 and a beta of 0.99.

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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