ServiceNow's stock is on track for its worst day ever. Here's what went wrong.

By Nora Redmond and Hannah Pedone

Investors are taking a close look at indicators of future business and wondering anew about the specter of AI disruption

ServcieNow's stock is under heavy pressure on Thursday.

ServiceNow's stock could see its worst trading day ever on Thursday as several metrics from the company's earnings report helped reignite fears about the software giant's ability to withstand artificial-intelligence-fueled upheaval.

One performance indicator in particular - a metric reflecting future sales - is spooking Wall Street, analysts say.

Shares of ServiceNow (NOW) opened down 24% on Thursday, and if that move holds through the close, the drop would be the largest one-day percentage decline on record, according to Dow Jones Market Data.

Analysts said management's outlook for current remaining performance obligations, or cRPO - a metric that reflects contracted revenue expected to be recognized over the next 12 months - is the biggest issue coming out of Wednesday afternoon's report.

While the company posted a 20.5% rise in cRPO to $13.65 billion for the September quarter, beating analysts' expectations of $13.56 billion, the company's forecast for the December quarter let investors down. ServiceNow projects cRPO growth to slow to 18.5% in the December quarter.

William Blair analyst Arjun Bhatia wrote in a Thursday note that the stock was down due to the cRPO outlook and he's "not surprised" by the market reaction. Investors have been concerned all year about how AI could disrupt software businesses.

Bhatia said that the reasons for the disappointing cRPO outlook are nuanced. Early contract renewals likely boosted results and drove a cRPO beat in the September quarter, though at the expense of those in the December quarter. Moreover, the public sector is moving toward striking "on-premises" deals, which are recognized as revenue upfront, rather than as cRPO. And a higher proportion of deals include "termination-for convenience" clauses, which let customers opt out when they want, are also pushing the cRPO outlook down, he said.

BMO analyst Keith Bachman wrote that even if the outlook is conservative, it "still points to deceleration." He noted that adding ServiceNow to his "Top Pick" list was a "mistake at this juncture."

ServiceNow's target is for subscription revenue of between $4.245 billion and $4.255 billion - growth of 22.5% to 23% and meeting forecasts at the lower end.

Derrick Wood of TD Cowen wrote there are "lots of mechanical caveats to help explain away" aspects of the disappointing forecast, "but we think it could re-raise AI disruption fears."

A team at Goldman Sachs, headed by Gabriela Borges, noted Wednesday that with its subscription revenue outlook raised only marginally and consumption of the company's artificial-intelligence features in its early stages, next year will stand as a key test of whether ServiceNow will benefit from high AI spending or falter from budget reallocations.

Analysts at JPMorgan, led by Samik Chatterjee, called the results "a bit noisy" in a Thursday note, adding that they appeared unconvincing to investors looking for signs of momentum.

They noted that "a large part of the challenges around the outlook stem from changes in scope for a cRPO metric which is not likely to remain as highly correlated to subscription revenue growth in the coming quarters as it has been historically."

However, to JPMorgan, the divergence between cRPO and revenue growth is likely to reverse over time, with the investment bank predicting an acceleration in the adoption of AI for more complex tasks and a potential speedup in AI monetization.

See also: Colleges raced to build massive computer-science departments. Now the boom is turning to bust.

-Nora Redmond -Hannah Pedone

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10-29-26 1001ET