![](https://d15shllkswkct0.cloudfront.net/wp-content/blogs.dir/1/files/2025/01/Bill-McDermott-Keynote-SAP-SapphireNOW-2017-768x396.jpg)
![](https://d15shllkswkct0.cloudfront.net/wp-content/blogs.dir/1/files/2025/01/Bill-McDermott-Keynote-SAP-SapphireNOW-2017-768x396.jpg)
Investors punished ServiceNow Inc. for its mixed fourth-quarter results and disappointing forecast, with a sharp selloff sending its stock way down in the after-hours trading session today.
The company reported fourth quarter earnings before certain costs such as stock compensation of $3.67 per share, narrowly beating the Street’s target of $3.65 per share. However, its revenue came up short at just $2.957 billion, up 21% from a year earlier but trailing the analyst’s $2.963 billion estimate. Meanwhile, subscription revenue came to $2.866 billion, also up 21%, but below the $2.879 billion forecast.
Net income for the quarter came to $348 million, up from $295 million in the year-ago period.
ServiceNow’s effort to appease investors by authorizing an additional stock repurchase of up to $3 billion didn’t have much of an impact, though, as its stock dived more than 8% in extended trading, adding to a 2% decline during regular trading hours.
Chief Executive Bill McDermott (pictured) highlighted some of the positives from what he said was an “outstanding” quarter, including its continued strong revenue growth and the growing interest in its artificial intelligence products. He revealed that the company saw 150% growth in new Now Assist service desk deals. Now Assist is the company’s flagship AI product, which applies AI to workflow automation. In the words of McDermott, it automates much of the “soul-crushing” manual work that humans were previously forced to do themselves.
“Generative AI is injecting new fuel into our already high-performing engine,” he said. “ServiceNow’s intelligent platform for end‑to‑end digital transformation is driving massive leaps in productivity and explosive growth. This is a breakthrough moment.”
Valoir analyst Rebecca Wettemann told SiliconANGLE that Now Assist has had a strong impact, and is actively helping customers to automate more service requests. “ServiceNow’s early moves in generative AI are paying off,” she agreed.
However, investors were looking for much faster growth than the company anticipates. For the new fiscal year, ServiceNow said it’s forecasting subscription revenue of between $12.64 billion and $12.68 billion, trailing the Street’s target of $12.86 billion.
ServiceNow Chief Financial Officer Gina Mastantuono blamed the shortfall on the strengthening of the U.S. dollar, saying it’s having a negative impact from a foreign exchange perspective. She said the company anticipates a $175 million foreign-exchange headwind on its subscription revenue in fiscal 2025.
Despite today’s stock slump, ServiceNow’s share price is still up more than 50% in the last 12 months, as investors believe it’s likely to see long-term benefits as a result of its early implementation of generative AI within its flagship platform.
Mastantuono told analysts that AI is going to “revolutionize” how enterprise work gets done. “Customers across industries are embracing these AI solutions at a rapid pace because it’s driving incredible productivity,” she said.
Few are questioning such claims, but many investors have become nervous about technology companies investing billions of dollars in AI lately after the sudden emergence of the Chinese AI startup DeepSeek, which has developed powerful models at a fraction of the cost of traditional large language models. While DeepSeek’s claim that it trained its R1 reasoning model for just $5.6 million has been questioned, most experts agree that it has definitely delivered significant cost-efficiency gains.
This means that ServiceNow will be under pressure to justify its AI investments, but Wettemann believes that the company is in a better place than those that are specifically focused on building LLMs. “The generative AI battle is increasingly about the platform, the guardrails and data safeguards, reasoning engine, data integration, testing and monitoring capabilities, rather than the models,” she said.
Wettemann said the impact of AI on worker productivity is so compelling that it’s inevitable that early adopters like ServiceNow will face tougher competition from their rivals. “It will have to continue to innovate and invest, particularly in partnerships that help customers pull more data together seamlessly and at lower cost,” she said.
ServiceNow may yet look to do that by offering its customers the opportunity to access DeepSeek’s models within Now Assist. Mastantuono didn’t confirm this, but she said the company is “open to using third-party models” as well as its own.
THANK YOU