ServiceNow's AI Focus Dampens Sales Outlook
ServiceNow Inc.'s fiscal-year sales forecast fell short of expectations, with the company prioritizing adoption of generative AI products over immediate revenue generation.
Key Points:
* Projected 2025 subscription revenue of $12.7 billion, below analysts' estimate of $12.9 billion.
* Shift towards pay-as-you-go pricing for generative AI tools, emphasizing adoption over upfront subscriptions.
* Stock declined over 9% in premarket trading.
* Focus on developing AI agents that handle tasks autonomously.
* Lowering costs of AI models via the advancements of DeepSeek, a Chinese startup.
* New AI-related contract value surged in the fourth quarter.
* Potential disruption in government spending due to the change in presidential administration.
* $3 billion share buyback program authorized.
Implications:
* ServiceNow's pricing model change may impact financial results.
* Generative AI expected to drive adoption and sales.
* Government spending concerns linger, but the company remains optimistic about cost-saving potential.
* Solid bookings in 2024 could improve annual sales outlook.
* Continued growth in customers with annual contract value above $1 million.