ServiceNow Gives Lackluster Outlook on Slower AI Sales Bump

ServiceNow (NOW), the AI platform for business transformation, recently announced its financial results for the fourth quarter ended December 31, 2024, with subscription revenues of $2,866 million in Q4 2024, representing 21% year-over-year growth and 21% in constant currency. However, the company's AI-related net new annual contract value (NNACV) contribution was lower than expected, and the Knowledge event in May generated less pipeline than anticipated. As a result, ServiceNow's subscription revenue growth for the quarter was 23%, lower than the 25% growth experienced in the previous quarter. Additionally, ServiceNow's guidance for the coming quarters has been affected, with the company raising its subscription revenue guidance for 2024 but maintaining its previous guidance for 2025.

ServiceNow's AI sales growth has slowed down in the recent quarter due to several factors. First, the strong U.S. dollar negatively impacted the company's international sales, as many of its customers are based outside the U.S. This currency headwind led to a decrease in subscription revenue growth compared to the previous quarter. Additionally, ServiceNow's shift in monetization model, which involves moving away from perpetual licenses and towards subscription-based pricing, also contributed to the slower AI sales growth. This change in strategy may have caused some customers to delay their purchases or negotiate lower prices, as they transition to the new pricing model. Lastly, the competitive landscape in the AI market has become increasingly crowded, with many new players entering the space and offering alternative solutions. This increased competition may have made it more difficult for ServiceNow to maintain its market share and drive AI sales growth.

ServiceNow's slower AI sales growth has impacted the company's overall financial performance and guidance for the coming quarters. In Q2 2024, ServiceNow's AI-related NNACV contribution was lower than expected, and the company's Knowledge event in May, which focused on AI, generated less pipeline than anticipated. As a result, ServiceNow's subscription revenue growth for the quarter was 23%, lower than the 25% growth experienced in the previous quarter. Additionally, ServiceNow's guidance for the coming quarters has been affected, with the company raising its subscription revenue guidance for 2024 but maintaining its previous guidance for 2025. This slower AI sales growth highlights the importance of ServiceNow's continued innovation and execution in other areas of its business to maintain its strong financial performance.

ServiceNow's recent business highlights include the latest breakthrough in the ServiceNow Platform, positioning it as the AI agent control tower. These innovations – a powerful new AI Agent Orchestrator to harmonize teams of AI agents working across tasks, systems, and departments, thousands of pre-built AI agents for every workflow, plus the new AI Agent Studio for building fully customized AI agents – will be available in March 2025 as part of ServiceNow's Pro Plus and Enterprise Plus offerings to help accelerate enterprise AI agent adoption. As part of the single, trusted ServiceNow Platform, these capabilities build on the company's two-decade expertise driving exponential productivity across every person and every process by handling complex and ambiguous tasks that traditional automation cannot solve.



ServiceNow continues to partner with leading companies to accelerate customers' AI transformation, today announcing the latest expansions to its technology partner ecosystem. ServiceNow and Google Cloud will broaden their partnership to launch ServiceNow on Google Cloud Marketplace and Google Discover, enabling customers to access ServiceNow's AI-powered tools directly from Google's platforms. Additionally, ServiceNow has expanded its strategic alliance with Visa, integrating ServiceNow's AI-powered tools with Visa's payment processing and fraud detection systems to provide a seamless and secure customer experience.



In conclusion, ServiceNow's slower AI sales growth in the recent quarter has impacted the company's overall financial performance and guidance for the coming quarters. However, the company's continued innovation and execution in other areas of its business, as well as its strategic partnerships, position ServiceNow to maintain its strong financial performance. As ServiceNow continues to invest in its AI capabilities and expand its technology partner ecosystem, the company is well-positioned to capitalize on the growing demand for AI-powered tools and services in the enterprise market.