The numbers were supposed to be the story. ServiceNow delivered a beat-and-raise first quarter, subscription revenue guidance was bumped higher, and the AI-driven product engine was humming. Instead, the market delivered the company’s worst single-day drubbing on record — an 18% collapse that wiped out tens of billions in market value in a matter of hours.
The stock has since clawed back some ground, closing Friday at $90.17 for a 6.36% gain. But that still leaves the shares roughly 57% below the July 2025 peak of $211.48, and dangerously close to the 52-week low of $81.24. The real test, however, comes Monday.
The Numbers Were Fine. The Context Wasn’t.
ServiceNow reported first-quarter adjusted earnings of $0.97 per share, a penny above consensus, on total revenue of $3.77 billion — up 22.1% year over year and slightly ahead of expectations. The non-GAAP operating margin expanded to 32%. The company raised its full-year subscription revenue forecast to a range of $15.735 billion to $15.775 billion, implying growth of 22% to 22.5%.
On paper, that’s a textbook beat-and-raise quarter. But the market fixated on what was missing from the picture.
The current remaining performance obligations — or cRPO, a key forward-looking metric — grew 22.5% to $12.64 billion. Analysts immediately questioned how much of that growth was organic versus inorganic, given the distorting effect of the Armis acquisition. CFO Gina Mastantuono acknowledged that the selloff likely stemmed from a lack of transparency around those non-organic contributions.
Adding to the unease, management cited geopolitical tensions in the Middle East as a source of “deal slippage” during the quarter — contracts that simply didn’t close on time. That admission was enough to overshadow the otherwise solid operational performance.
A Wave of Price Target Cuts — But Not Many Downgrades
The rout triggered a flurry of analyst revisions, though most firms kept their buy ratings intact. BMO Capital trimmed its target to $115 from $120, Needham went to $115, BTIG to $150, Mizuho to $140, and Wolfe Research to $125. DA Davidson maintained its buy rating but lowered its target to $190, while Piper Sandler stayed bullish with a new $140 target.
The most bearish call came from KeyBanc’s Jackson Ader, who held firm on his sell rating and slashed his target to $85. He pointed to deal delays in the Middle East, a below-average cRPO beat, and margin pressure as reasons for caution.
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Goldman Sachs and Jefferies also cut their price targets, though both retained buy-equivalent ratings.
Strong Signals Beneath the Surface
Despite the macro noise, several operating metrics told a compelling story. The number of customers with annual contract values exceeding $5 million grew roughly 22% to 630. New business transactions above $5 million surged nearly 80%. New customer growth jumped more than 50%, including what ServiceNow described as the largest new customer deal in company history — worth over $15 million.
The renewal rate held steady at 97%. And the company’s AI product, Now Assist, continued to gain traction: the number of customers with annual contract values above $1 million surged 130%.
The Armis Question Looms Large
The $7.75 billion acquisition of cyber-intelligence specialist Armis closed on April 20, just days before the earnings report. That timing couldn’t have been worse for transparency. Investors are still trying to parse how much of the reported growth is organic and how much is acquisition-driven — and management has yet to provide a clean breakdown.
The integration of Armis into ServiceNow’s “AI Control Tower” platform will be a central topic at Monday’s Financial Analyst Day in Las Vegas. So will the company’s broader AI monetization strategy, including how quickly pilot programs for the “Autonomous Workforce” — featuring AI agents that can independently resolve IT support requests — can be converted into scalable enterprise revenue.
Monday’s Make-or-Break Moment
The May 4 analyst day is being framed as far more than a routine investor event. With the stock trading near its lows, management has a narrow window to restore confidence. The agenda includes specific targets for AI-related revenue, greater clarity on organic growth dynamics, a credible timeline for Armis integration, and a path to margin expansion starting in 2027.
Technically, the $90 level is being watched as a near-term support zone after Friday’s rebound. Whether it holds will depend almost entirely on how convincingly the C-suite addresses the questions that triggered the historic selloff in the first place.
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