Now, ServiceNow (NOW 12.17%) – a name that sounds suspiciously like a robot butler – had a bit of a tumble on Thursday. A proper plunge, really. Shares went down, down, down, like a naughty boy sent to his room. By afternoon, they were clinging on for dear life, about 12% lighter than they’d been that morning. A most unpleasant experience for anyone holding them, I assure you.
The trouble, you see, began with their quarterly earnings report. A document filled with numbers, naturally. Numbers can be frightfully misleading, but in this case, they seemed perfectly decent. Perfectly decent, and yet… the market wasn’t impressed. A most peculiar reaction, wouldn’t you agree?
They announced revenue of $3.57 billion – a whopping pile of pennies, that is – up 21% from last year. And profits? A rather handsome $0.92 per share, a 24% jump. The clever clogs at Wall Street were expecting $3.53 billion and $0.88, so ServiceNow didn’t just meet expectations, it rather skipped over them with a cheerful hop.
Their subscription business is booming – climbing 21% – and they’ve got a future revenue pile, known as RPO, that’s grown to a colossal $28.2 billion. A good sign, that. It means they’ll be raking in the cash for the next few quarters, at least. The current portion of that pile, the bit they’ll get their hands on soon, is up 25% to $12.85 billion. Enough to buy a small country, I shouldn’t wonder.
But here’s the sticky bit. Despite all this good news, the share price fell. Why? Well, it seems investors are getting jittery. They fear that other companies will simply copy ServiceNow’s clever automation software using their own artificial intelligence. A bit like a mischievous imp stealing someone else’s toys. And when investors get scared, they sell. Simple as that.
And then there’s the acquisition spree. ServiceNow has been gobbling up other companies like a greedy glutton at a buffet. First, Moveworks, an AI agent specialist, for $2.85 billion. Then, the announcement of a $7.75 billion purchase of Armis, a cybersecurity start-up. It’s all very exciting, of course, but acquisitions are a bit like mixing potions. Sometimes they work beautifully, sometimes they explode in your face. There’s a risk of not getting what you paid for, culture clashes, and talented people running for the hills.
ServiceNow is predicting subscription revenue growth of 21% for the year. But after you take away the currency fluctuations and the newly acquired companies, the organic growth is only 19%. A rather crucial number, according to Jackson Ader at KeyBanc, who seems to think anything below 20% is a bit of a disaster. A rather dramatic pronouncement, wouldn’t you say?
Despite this little wobble, ServiceNow still trades for a rather extravagant 33 times its earnings. A hefty price tag, indeed. Investors, understandably, are taking a ‘wait and see’ approach. A sensible plan, I think. After all, it’s best to observe before diving headfirst into a puddle.
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2026-01-29 21:42