ServiceNow Stock Has Worst Day Ever on Disappointing Sales – Yahoo Finance
(Bloomberg) — ServiceNow Inc. shares plunged the most ever after the provider of software for business tasks reported results that disappointed investors and said some sales deals have been delayed by the war in the Middle East.
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Subscription revenue rose 22% to $3.67 billion in the quarter ended March 31, about in line with analysts’ average estimate compiled by Bloomberg. That expansion rate would have been nearly 1 percentage point higher if not for “delayed closings of several large on-premise deals in the Middle East, due to the ongoing conflict in the region,” the company said Wednesday in a statement.
The shares plummeted almost 18% on Thursday, the biggest single-day decline since ServiceNow became a public company almost 14 years ago. The stock has dropped 45% this year. Separately, IBM posted similar in-line results Wednesday for its software business, also disappointing investors.
Leading software developers like ServiceNow are facing steep skepticism from Wall Street about their ability to thrive in the AI era. The Santa Clara, California-based company has launched a number of AI features and been vocal in its attempts to change the narrative, but the shares had already declined 33% this year heading into Wednesday’s results, mirroring a slide from peers such as Salesforce Inc. and Workday Inc.
The company now expects $1.5 billion of AI annual contract value this year, up from an earlier target of $1 billion, Chief Executive Officer Bill McDermott said on a conference call with analysts after the results were released. ServiceNow said it had 630 customers with more than $5 million in annual contract value, up from 603 in the previous quarter.
“We believe it will be difficult for results or management commentary to alleviate concerns around medium-term AI disruption,” wrote Brad Zelnick, an analyst at Deutsche Bank, in a note ahead of earnings.
Subscription revenue will increase about 23% to $3.82 billion in the period ending in June, the company said. Analysts, on average, estimated $3.75 billion.
Earlier this week, ServiceNow completed its largest-ever acquisition of cybersecurity startup Armis for $7.75 billion. That will boost subscription revenue growth this year by about 1.25 percentage points and compress operating margins by about 0.75 percentage points, the company said.
