ServiceNow just delivered a knockout punch to Wall Street expectations, crushing third-quarter estimates while announcing its first stock split in years. The enterprise software giant's AI-powered growth story sent shares up 4% after hours, proving that the AI transformation isn't just hype – it's driving real revenue growth across Fortune 500 companies.
ServiceNow just proved that the enterprise AI boom isn't just Silicon Valley marketing speak. The company's third-quarter earnings demolished Wall Street's expectations Wednesday evening, with revenue hitting $3.41 billion versus the $3.35 billion consensus. More importantly, the board approved a five-for-one stock split – the first in years – signaling management's confidence in the company's AI-driven trajectory.
The numbers tell a compelling story. Adjusted earnings per share reached $4.82, crushing the $4.27 estimate by a wide margin. Subscription revenues, which make up the bulk of ServiceNow's business, totaled $3.3 billion and beat StreetAccount's $3.26 billion forecast. Overall revenue grew 22% year-over-year, a pace that would make most enterprise software companies envious.
"Every enterprise in every industry is focused on AI as the innovation opportunity of our generation," CEO Bill McDermott said in the earnings release. He called the results the "clearest demonstration" that businesses are actually relying on ServiceNow for AI capabilities, not just testing them.
The AI story gets more interesting when you dig into the numbers. Finance chief Gina Mastantuono told CNBC that ServiceNow's AI business is projected to surpass $500 million in annual contract value this year. That puts the company on track to hit its ambitious $1 billion target by 2026, a goal outlined at the company's recent investor day.
"The value AI is going to create in enterprise is like nothing that we've seen in a very, very long time," Mastantuono explained. "We have real customers, it's not just hype, and we have real values and we're driving real outcomes for those customers." That's exactly what investors want to hear as AI skepticism grows across tech markets.
ServiceNow raised its full-year subscription revenue guidance again, now expecting between $12.84 billion and $12.85 billion versus the previous range of $12.78 billion to $12.80 billion. The company has been consistently beating and raising throughout 2025, a pattern that's becoming increasingly rare in the current economic environment.
Net income jumped to $502 million, or $2.40 per share, compared to $432 million, or $2.07 per share, in the same quarter last year. Current remaining performance obligations – essentially contracted future revenue – reached $11.35 billion, providing strong visibility into 2026 results.
The stock split announcement caught many by surprise. ServiceNow's board approved the five-for-one split effective early December, with Mastantuono saying it will "make shares accessible to more retail investors." At current prices around $900 per share, the split would bring individual shares down to roughly $180, potentially broadening the investor base.
But the split also signals something deeper about management's confidence. Stock splits typically happen when companies believe their shares are headed higher, making the current price seem like a bargain in hindsight. Despite being down 13% year-to-date, ServiceNow's leadership clearly sees better days ahead.
The government business provided another bright spot, with U.S. federal revenue growing more than 30% in the third quarter. Mastantuono noted that "whenever the government reopens, the administration's continued focus on cost efficiency and modernization aligns directly with our strengths." That's particularly relevant given ongoing budget pressures and efficiency mandates across federal agencies.
Fourth-quarter guidance came in at $3.42 billion to $3.43 billion in subscription revenues, accounting for potential government disruptions. Even with that conservative approach, the numbers suggest ServiceNow will close 2025 with momentum heading into next year.
ServiceNow's earnings beat and stock split announcement validate the company's position as a key beneficiary of enterprise AI adoption. While the stock remains down for the year, the combination of accelerating AI revenues, raised guidance, and management's confidence in approving a stock split suggests the enterprise software giant is hitting its stride. Investors will be watching whether ServiceNow can maintain this momentum as it heads toward its ambitious 2026 AI revenue targets.
