ServiceNow shares fell 27% on Thursday in their worst trading day on record after the enterprise software company reported third-quarter results that disappointed investors and reignited fears about how artificial intelligence may reshape the software business.
The company posted third-quarter revenue of $4.11 billion, slightly above the $4.10 billion estimate from analysts polled by LSEG, according to CNBC reporting. However, adjusted earnings reached $1.00 per share, falling short of the $1.02 forecast. Citi analyst Tyler Radke told CNBC that the results were uncharacteristic for ServiceNow, noting the lack of upside surprised the market. The weak profit performance did little to ease recent worries about a potential 'SaaSpocalypse', reflecting broader concerns that new AI capabilities could upend how traditional software companies operate and generate revenue.
Despite the sell-off, ServiceNow did provide some positive news by slightly raising its full-year 2026 subscription revenue outlook to between $15.78 billion and $15.79 billion. The company also reported that net new AI average contract value jumped 65%, suggesting demand for its artificial intelligence offerings remains strong. Yet investors appear focused on what the company has not delivered rather than what it has achieved.
According to Radke, one key factor unsettling investors is the absence of immediate financial returns from ServiceNow's newly formed forward-deployed engineering team, which embeds in enterprises to build artificial intelligence solutions. This team represents a significant investment by the company, but the payoff appears distant. Radke said the market wanted to see quicker results but investors will likely need to wait until next year to see a meaningful inflection in returns from this initiative.
For investors in software stocks, the sharp decline signals concern that even companies showing revenue growth and expanding AI revenue may face pressure if they fail to convert investments into near-term profits quickly enough to satisfy the market.