ServiceNow stock falls despite earnings beat as CEO Bill McDermott tries to get investors to stop thinking of it as a SaaS company

ServiceNow CEO Bill McDermott has been on a mission to persuade investors to stop thinking of his enterprise software company as a standard SaaS (software-as-a-service) business.

So far, McDermott has met with skepticism from the Street, which has been fixated on the lofty valuation of ServiceNow’s shares. The stock trades at a trailing price-to-earnings ratio that is more than twice that of some competitors, such as Salesforce. As a result, ServiceNow’s stock has declined 40% over the past year despite consistently strong results.

But on Wednesday, McDermott got yet more ammunition to wield against ServiceNow’s doubters.

The company reported fourth-quarter earnings that handily beat Wall Street’s top-line and bottom-line growth forecasts for a ninth consecutive quarter. Subscription revenue for the three months ended Dec. 31 was $3.47 billion—up 21% year over year—and non-GAAP earnings per share were $0.92. Both figures topped consensus estimates of roughly $3.42 billion and $0.87, respectively. 

The company also raised its full-year 2026 guidance for subscription revenue, forecasting it will make between $15.53 billion to $15.57 billion. This implies growth of roughly 20% to 21%—well above the 18% to 18.5% that analysts had expected.

The company reported that Now Assist, its AI product suite,...