ServiceNow ((NOW 1.74%) stock is getting crushed with sell-offs in Thursday's trading. The software company's share price was down 18.3% as of 2 p.m. ET and has played a significant role in dragging the broader market lower. The S&P 500 was down 0.7% at the same point in the day's trading, and the Nasdaq Composite was down 1.2%.
ServiceNow published its first-quarter results after the market closed yesterday, and the business delivered a modest sales beat and earnings that were in line with the average analyst estimate. Despite what mostly looks like a solid earnings report, the stock is getting hammered today.
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ServiceNow's Q1 results were solid
ServiceNow recorded non-GAAP (adjusted) earnings per share of $0.97 on revenue of $3.77 billion in this year's first quarter. The earnings-per-share performance hit the average Wall Street target, and sales came in $20 million higher than called for by the consensus estimate. While the business recorded year-over-year revenue growth of 22% in the period, the company guided for a softer-than-expected outlook on gross margins and some deal delays in conjunction with the Iran war. As of this writing, ServiceNow is on track to close out today with its largest single-day loss across its history as a publicly traded company.
NYSE: NOW
Key Data Points
Was ServiceNow's guidance really that bad?
Amid concerns that artificial intelligence (AI) could have a disruptive impact on the software-as-a-service (SaaS) space, ServiceNow's Q1 report was set up to be something of a referendum on stocks in the category. With guidance for subscription revenue growth to come in between 21% and 21.5% on a currency-adjusted basis this year, the company's guidance was far from terrible -- but its target for a gross margin of 81.5% fell short of Wall Street's call for a margin of 82.1%. While the margin decline could indicate some softening for pricing power, the market could be overreacting.
