ServiceNow (NOW) Q3 Revenue Rises 20% to $4.11B but Shares Fall 25%

ServiceNow (NOW) shares dropped 25% on May 5, 2026, after its third-quarter results fell short of expectations. The company reported revenue of $4.11 billion, up more than 20%, roughly matching analyst estimates of $4.10 billion. However, adjusted earnings per share came in at $1.00, slightly below the forecast of $1.02.

Despite the earnings miss, ServiceNow raised its full-year 2026 subscription revenue guidance slightly to between $15.78 billion and $15.79 billion. Net new AI average contract value increased by 65%. Yet, concerns about the delays in benefits from investments in its new forward-deployed engineering AI team weighed on investor sentiment.

Analysts cited the lack of immediate returns from AI investments as a factor behind the stock decline. Market participants may have expected quicker results from AI integration. The company’s ongoing AI efforts are anticipated to show significant impact starting next year. The results have also reconfirmed existing concerns about AI-induced disruptions to traditional software business models.

This matters for investors because the 25% stock drop reflects market apprehension about near-term profitability and AI strategy effectiveness, even as subscription revenue guidance improves. The timing of when AI investments start contributing meaningfully to earnings will be key for ServiceNow's stock performance.