ServiceNow Declines 10% Since Q4 Results: What Should Investors Do?

Core Viewpoint - ServiceNow's shares have declined 10.7% following the release of its fourth-quarter 2024 earnings, despite beating revenue and earnings estimates, primarily due to a modest subscription revenue growth projection for 2025 [1][2]. Revenue and Earnings Summary - For 2024, ServiceNow reported subscription revenues of $10.639 billion, reflecting a 22.5$12.635-$12.675 billion, indicating an 18.5$13.07 billion, suggesting an 18.96% growth over 2024 [15]. Customer and Market Position - As of the end of Q4 2024, ServiceNow had 2,109 customers with over $1 million in annual contract value (ACV), marking a 14$1 million in net new ACV, with 19 deals exceeding $5 million [8]. AI and Technology Integration - ServiceNow is leveraging AI and machine learning to enhance its solutions, with Pro Plus AI growing 150% sequentially [9]. - The collaboration with major partners like Amazon, Microsoft, and NVIDIA is expected to bolster ServiceNow's market share and enhance its GenAI capabilities [10][11][12]. Stock Performance and Valuation - ServiceNow shares have returned 30.1% over the past 12 months, outperforming the Zacks Computer & Technology sector and the Computers – IT Services industry [6]. - The stock is currently considered overvalued, with a forward 12-month Price/Sales ratio of 15.8X, higher than its median of 14.03X and the industry's 11.24X [16]. Future Outlook - The company's strategy to accelerate the adoption of its Agentic AI may negatively impact subscription revenue growth in 2025 [4]. - Despite the challenges posed by unfavorable forex and a tough macroeconomic environment, ServiceNow's strong GenAI portfolio and partner base are expected to drive client growth and subscription revenues [22].