ServiceNow stock is on track for its largest drop on record. But JPMorgan sees a bright spot.

Shares in ServiceNow declined almost 18% in premarket trading on Thursday. Shares in ServiceNow plunged after the software platform reported a set of mixed third-quarter results, with revenue beating expectations while earnings fell short. But analysts still see the stock rising over time. The Santa Clara, Ca.-headquartered company's stock (NOW) tumbled nearly 18% in Thursday's premarket trading, falling to $123.21. If sustained during the day, it will mark the largest percentage drop on record, according to Dow Jones Market Data. ServiceNow reported revenue in the three months ended September of $4.106 billion, up 20.5% year-on-year and surpassing Wall Street consensus of $4.095 billion, according to FactSet. Earnings per share came in at $1, falling below analysts' projections of $1.02. While the company posted a 20.5% rise in current remaining performance obligations, or cRPO - a metric that reflects contracted revenue expected to be recognized over the next 12 months - to $13.65 billion, it said it expected growth to slow, with an increase of 18.5% projected in the fourth quarter. The platform also said it has a target for subscription revenue of between $4.245 billion and $4.255 billion, marking a growth rate of 22.5% to 23% and meeting forecasts at the lower end. A team at Goldman Sachs, headed by Gabriela Borges, noted Wednesday that with its subscription revenue outlook raised only marginally and consumption of the company's artificial-intelligence features in its early stages, next year will stand as a key test to prove whether ServiceNow can benefit from high AI spending or falter from budget reallocations. The bank maintained its 12-month price target of $154. DA Davidson analyst Gil Luria also maintained his price target, of $170, agreeing that ServiceNow is making a short-term trade-off for more upside in the longer term. Analysts at JPMorgan, led by Samik Chatterjee, referred to the results as "a bit noisy" in a Thursday note, adding that they appeared unconvincing to investors looking for signs of momentum. "Although a large part of the challenges around the outlook stem from changes in scope for a cRPO metric which is not likely to remain as highly correlated to subscription revenue growth in the coming quarters as it has been historically," they said. For JPMorgan, the divergence between cRPO and revenue growth is likely to reverse over time, with the investment bank predicting an acceleration in the adoption of AI for more complex tasks and a potential speedup in AI monetization. It raised its price target from $150 to $160 for 2027. -Nora Redmond This content was created by MarketWatch, which is operated by Dow Jones & Co. MarketWatch is published independently from Dow Jones Newswires and The Wall Street Journal.

ServiceNow stock is on track for its largest drop on record. But JPMorgan sees a bright spot.

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