ServiceNow Shares Slip Despite Strong AI Growth. Should Investors Buy the Dip on the Stock?

The software-as-a-service (SaaS) assemblage has been successful the dumps, and close now, these companies tin bash nary close successful the eyes of investors. ServiceNow (NYSE: NOW) became the latest illustration of this, with its shares plunging contempt reporting beardown fourth-quarter results and issuing upbeat guidance.

ServiceNow is pivoting to beryllium an artificial quality (AI) archetypal company, and its generative AI suite of solutions, Now Assist, continues to beryllium a maturation driver, reaching a $600 cardinal yearly declaration worth (ACV). It volition look to turn to implicit $1 cardinal by the extremity of 2026. Meanwhile, it is successful the process of acquiring AI cybersecurity companies Armis and Veza to assistance necktie information and AI capabilities together. With its AI Control Tower platform, it is besides looking to go an orchestration level for agentic AI.

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For Q4, ServiceNow's gross roseate 20.5% twelvemonth implicit twelvemonth to $3.57 billion, portion adjusted net per stock (EPS) jumped 26% to $0.92. That bested the expert consensus, which was looking for EPS of $0.88 connected gross of $3.53 billion, arsenic compiled by the LSEG. Subscription gross climbed 21% twelvemonth implicit twelvemonth to $3.47 billion, portion nonrecreational services gross roseate 13% to $102 million.

Another fashionable SaaS metric is remaining show obligations (RPO), which is deferred gross positive backlog growth. This measurement is intimately watched, arsenic it tin beryllium an indicator of aboriginal gross growth. In the quarter, the institution saw RPO summation by 26.5% to $28.2 billion, portion existent RPO (cRPO) roseate by 25% to $12.85 billion.

Looking ahead, the institution forecast its Q1 subscription gross to turn 21.5% to a scope of $3.650 cardinal to $3.655 billion. It anticipates cRPO to summation by 22.5%. For the afloat year, it projected subscription gross of betwixt $15.53 cardinal and $15.57 billion, representing maturation of 20.5% to 21%.

ServiceNow is showing nary signs that AI is negatively impacting its business, and its CEO specifically said connected the company's net telephone that AI volition not "replace endeavor orchestration" and that it is simply a immense opportunity. The company's unified information strategy and structured workflows, meanwhile, should marque it an perfect situation for AI and a launchpad for AI agents. At this point, the concern is performing well, but the banal is not. However, the accidental is inactive there.