Investors have delivered a negative verdict on ServiceNow’s latest financial results, sending the stock sharply lower even as the company posted impressive quarterly figures. The market’s focus has shifted decisively from current performance to future concerns, centering on a decelerating growth forecast and a major, costly acquisition.
Robust Quarterly Results Overshadowed by Guidance
The software giant’s operational metrics for the fourth quarter of 2025 were undeniably solid. Revenue reached $3.57 billion, representing a year-over-year increase of 20.5% and surpassing consensus estimates. Earnings per share also exceeded expectations, coming in at $0.92 against projections of $0.88. A significant contributor to this performance was the accelerated adoption of the company’s “Now Assist” AI platform, which has already achieved an annual contract value exceeding $600 million.
Despite these strong numbers, the share price declined approximately 10-12% in the days following the report. The primary catalyst for the sell-off was management’s subscription revenue growth projection for 2026, which is set between 18.5% and 19%. For a company historically accustomed to growth rates above 20%, this guidance signals an unwelcome slowdown. Market participants are increasingly concerned that the long-term effect of generative AI could reduce the number of required software licenses, or “seats.”
Should investors sell immediately? Or is it worth buying ServiceNow?
Acquisition and Analyst Divergence Add to Uncertainty
Compounding these growth anxieties is the announced acquisition of cybersecurity firm Armis. The all-cash deal, valued at $7.75 billion and unveiled in late December, has been met with a mixed reception. While it expands ServiceNow’s footprint in the security sector, the high valuation and potential integration risks have raised questions about capital allocation.
Following the earnings report and a 5-for-1 stock split executed in December, financial analysts are deeply divided on the stock’s outlook:
- Citigroup views the pullback as a buying opportunity, raising its price target to $237. The firm cites ServiceNow’s leadership position in the AI sector as a key rationale.
- RBC Capital and Stifel adopted a more cautious near-term stance, lowering their price targets to $185 and $180, respectively. Both firms acknowledge short-term volatility but maintain a positive long-term view.
- KeyBanc issued a stark warning, slashing its target to $115. Analysts there pointed to valuation concerns in light of the lowered growth forecasts.
Trading around $117, ServiceNow’s shares are hovering perilously close to their recent 52-week lows. The market is now demanding clear evidence that the company’s substantial investments in artificial intelligence will yield timely returns. For a sustained recovery, management must demonstrate in coming quarters that the integration of Armis is proceeding smoothly and that the current growth moderation is only a temporary phase.
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