Key Takeaways
- ServiceNow fell 19% after adjusted EPS of $1.00 missed the $1.02 consensus and it guided fourth-quarter backlog growth to 18.5%, from 20.5%.
- Its rally since June came from a higher multiple, so a small miss undid much of it.
- Salesforce fell with it, and the same AI worry hangs over Adobe and Intuit.
- The fourth-quarter report in late January, with AI contract value and a first 2027 guide, is the next test.
ServiceNow (NOW) sank 19% today after its third-quarter report.
Salesforce (CRM) fell 6%. Adobe (ADBE) and Intuit (INTU) face the same worry: that AI agents shrink what companies pay for software.
That’s a long way from what ServiceNow CEO Bill McDermott told Wednesday night’s Mad Money: “this is a unicorn growth company.”
A penny short, and a slower backlog
Here’s the quarter:
- Revenue: $4.11 billion, up 20.5%, above the $4.09 billion consensus
- Adjusted EPS: $1.00, a cent under consensus
- cRPO: up 20.5%, with 18.5% guided for the fourth quarter
- 2026 AI contract value target: raised to $1.7 billion
The backlog guide stung. But 18.5% is close to what analysts already expected. They see revenue growth slowing to about 19% in 2027:
So I wouldn’t expect big cuts to those estimates.
The price had run ahead of earnings
ServiceNow stock climbed 42% from June 30 to Oct. 12 while forward earnings rose just 4%. Its forward P/E went from 23x on June 30 to 32x at Wednesday’s close:
Today’s drop takes it to about 26x, about half its five-year average of 53x.
Software sold off as a group
Salesforce’s own backlog is moving the other way: its cRPO growth sped up to 14% in the quarter ended July 31. Salesforce’s drop looks like investors selling the whole group.
Adobe and Intuit are already priced for the worry. Adobe traded at 9.3x forward earnings at Wednesday’s close, even after raising its full-year targets in September. Intuit was at 14x after guiding fiscal 2027 revenue growth to 9-10%, down from 14%. Intuit’s report in late November and Adobe’s in December will show whether AI is costing them business.
TIKR tracks 49 analysts on ServiceNow. How many say “Buy”?
See the full breakdown of Buy, Hold, and Sell ratings on ServiceNow, along with Wall Street’s revenue and earnings estimates, all in one place. More than 500,000 investors use TIKR to research stocks like this one. See ServiceNow’s Analyst Ratings
A fairer price for the unicorn
My take: the quarter didn’t break ServiceNow’s story, and the drop took out the froth the rally had added. At about 26x forward earnings for revenue growth near 19%, the stock looks a lot more reasonable than it did on Wednesday.
Of course, the fourth-quarter report in late January, with AI contract value against the $1.7 billion target and the first 2027 guide, is the next real test.
So what is ServiceNow stock actually worth?
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Disclaimer:
Please note that the articles on TIKR are not intended to serve as investment or financial advice from TIKR or our content team, nor are they recommendations to buy or sell any stocks. We create our content based on TIKR Terminal’s investment data and analysts’ estimates. Our analysis might not include recent company news or important updates. TIKR has no position in any of the stocks mentioned. Thank you for reading, and happy investing!
