Shares of ServiceNow Inc. dropped 18% in after-hours trading today after it posted quarterly results that topped its internal guidance, but mostly fell short of analyst expectations.

ServiceNow is best known for its ITSM, or information technology service management, platform. Enterprise IT teams use it to deliver technical support to employees and coordinate infrastructure upgrades. ServiceNow also offers a wide range of other products that ease tasks such as managing customer data and creating artificial intelligence agents.

The company generated $1.04 billion in adjusted operating income during the third quarter, which translated to adjusted earnings of $1 per share. Analysts had expected $1.02 per share. The company’s top line fared better, growing 20.5% on a year-over-year basis, to $4.11 billion. That put ServiceNow $20 million above the consensus estimate.

The company’s sales growth was partly driven by demand from large customers. ServiceNow inked 19 deals with an annual contract value, or ACV, of over $5 million, which represents a 135% increase from a year earlier. Chief Executive Officer Bill McDermott told investors that net new ACV attributed to AI products rose 65% on a year-over-year basis.

One contributor to the company’s AI momentum is its EmployeeWorks tool. It’s an employee portal that displays to-do items, company updates and related information. A chatbot called Otto enables users to search for data across multiple applications at once, as well as automate certain repetitive tasks. ServiceNow says that EmployeeWorks reached $100 million in ACV within three quarters of its launch.

Super Intelligence Control Tower is another core pillar of the software maker’s AI growth strategy. It’s a platform that can automatically map out all the AI models and agents in a company’s technology environment. It protects those assets against risks such as prompt injections. Additionally, the software can track the quality of AI models’ prompt responses and measure the productivity gains they deliver.

McDermott revealed that a core Super Intelligence Control Tower usage metric is growing 500% month-over-month. He added that ServiceNow expects its AI business to achieve “true acceleration” next year.

ServiceNow raised its full-year AI ACV projection to $1.7 billion, a 70% increase from January. However, the company’s fourth-quarter revenue forecast still fell short of expectations. ServiceNow expects sales of $4.25 billion to $4.26 billion, while analysts projected $4.36 billion.

The company announced a series of AI partnerships in conjunction with its earnings report. ServiceNow is teaming up with OpenAI Group PBC to launch a plugin that will enable customers to access its platform through ChatGPT. Separately, the company is forming a partner group designed to prompt the Super Intelligence Control Tower. The consortium, which includes major industry players such as Nvidia Corp., will develop joint offerings and collaborate on go-to-market initiatives.

Photo: ServiceNow