Daave “3 and 30” Tepper
Institutional Endowment Investor
ServiceNow's product isn't naturally adaptable to AI-centric offerings, so it has to be rebuilt and relaunched, something Notion did early. A post the author replies to says ServiceNow is effectively announcing it can't make it without AI tokens. Issuing stock to employees only to buy the shares back makes ServiceNow a capital incinerator. x.com x.com
ServiceNow is a very good product that will not stay one for long, so it is not a business to own for the next decade. It burned through its annual AI token budget in three months and depends on that spend, and healthy companies don't refinance term loans with a $4B bond. @theaiportfolios counters that the bond refinances Armis acquisition debt, not AI compute, and that the stock sits at a record-low 18.2x forward earnings. Buying ServiceNow, Salesforce or software ETFs here is a mistake. x.com x.com x.com
ServiceNow still looks too expensive even after falling 60-70% from its highs, given slowing growth, compressing margins, too much dilution and significant future AI risks. @realroseceline notes guidance drove the drop: the Armis acquisition brings temporary margin pressure, current remaining performance obligations are decelerating from 22% to 18%, and stock-based compensation has reaccelerated. x.com
ServiceNow's seat business is being cannibalized faster than AI deals can replace it. Next-quarter cRPO growth is guided to 18.5%, down from 20.5%, while subscription growth was 24.5% two quarters ago; agentic usage on its platform is up 13x. Management points to AI deal value heading to $1.7bn, against a roughly $16bn subscription business. The slowdown leaves more pain ahead. Underweight, $90 target. x.com x.com
ServiceNow's unexpected expense surge makes its rich valuation more vulnerable in a struggling software sector. Revenue rose 21%, but spending drove an EPS miss and one quarter of guided cRPO deceleration; wider market conditions could hurt near term. The 20% selloff looks excessive, and few software companies should benefit as much from AI. Management could deliver over 3-5 years, though the stock is only close to a buy again now; below $100 looks good for the long term. x.com x.com x.com x.com
ServiceNow's costs are rising far faster than revenue without the RPO acceleration management promised. Q3 revenue rose 21%, while total cost of revenue climbed 56% and net income fell 45%; stock compensation appears to be using about half of free cash flow. The selloff looks deserved, though the shares are now closer to fair value. Sustainable margins and measurable returns remain the test. x.com x.com x.com x.com x.com x.com
ServiceNow's slowing contracted-revenue growth suggests agentic AI and growing open-source alternatives may be reducing the need for its products. Q3 operating margin fell to 9.4% from 16.8% a year earlier, net income dropped, and cRPO growth slowed from 25% to 20.5%; Q4 guidance implies 18.5%. x.com
Cost fears and CRPO misunderstandings caused ServiceNow's selloff. The stock is definitely undervalued; the market's reaction is ridiculous. x.com
Investors dislike ServiceNow scaling up forward-deployed engineers, even though it is directionally right for customer outcomes. That aversion is the main reason the SaaS selloff is back. x.com
ServiceNow's guidance growth is set to fall by another fifth next quarter, a poor trajectory rather than a buying opportunity after earnings. x.com
ServiceNow's AI contract growth and improving free cash flow margin make the 18% selloff excessive and its shares a massive discount among leading enterprise AI companies. AI net-new ACV rose 65%; its 2026 AI ACV target rose to $1.7B, up 70% from the start of the year. Adjusted operating margin slipped to 32.5% from 33.5%, but free cash flow margin rose to 20% from 17.5%. Acquisition costs, stock compensation and severance largely drove the GAAP decline. x.com x.com x.com
ServiceNow's gross profit and expense trends show its underlying business deteriorating despite the AI revenue pitch. Quarterly gross profit grew just over 10% year over year, possibly its slowest pace ever, while expenses rose across the board and profit weakened materially. Relabeling revenue as AI has not changed the trend in total sales. x.com
