ServiceNow Hits Record Low as AI Disruption Fears Trigger 27% Plunge; Fortinet Drops 20% on Guidance Cut

Key points

• ServiceNow stock declined 27% on October 29, its worst single-day performance, after Q3 adjusted earnings of $1.00 per share missed the $1.02 forecast, despite revenue of $4.11 billion matching estimates.
• The sell-off was driven by a current remaining performance obligations (CRPO) growth rate of 18.5%, below the 19.4% Wall Street expected, reigniting fears that AI could disrupt traditional software models.
• Fortinet shares tumbled 20% after lowering full-year service revenue guidance to $5.15-$5.17 billion, below the previous $5.18-$5.22 billion range and analyst estimates of $5.2 billion.
• Analysts lowered Fortinet price targets, with Mizuho cutting its target to $118 and Piper Sandler to $140, citing lower attach rates for bundled networking and secure access service edge offerings.
• ServiceNow CFO Gina Mastantuono defended the CRPO metric as nuanced, while Oppenheimer analyst Brian Schwartz maintained a Buy rating, arguing AI adoption counters disruption concerns despite slower growth.

Background

ServiceNow shares had already fallen 15% on October 28 following an initial earnings miss, and the October 29 crash marked the second consecutive day of sharp declines. This follows a broader software sector weakness, including a 6% drop in Netflix shares on October 20 due to lowered full-year revenue guidance, and rising inflation concerns from October 14 that pressured tech valuations.

How outlets are covering it

Yahoo Finance emphasized the CRPO miss as the primary driver of ServiceNow's 27% drop, noting CFO Mastantuono's pushback on the metric's limitations. CNBC highlighted the 'SaaSpocalypse' narrative, with Citi's Tyler Radke describing the results as uncharacteristically lacking upside and noting investors' impatience for immediate returns from ServiceNow's forward-deployed AI engineering teams. Both outlets agreed on the 24-27% decline range but differed on emphasis: Yahoo focused on the accounting metric and analyst buy recommendations, while CNBC stressed the delayed payoff from AI investments and the broader disruption thesis. Bloomberg Intelligence, cited by Yahoo, focused on Fortinet's lowered attach rates, while BofA and Mizuho cut price targets in response.

Why it matters

The sharp declines in ServiceNow and Fortinet signal growing investor anxiety that AI may erode traditional software and cybersecurity revenue models, particularly when forward guidance misses expectations. The sector's vulnerability to AI disruption fears could trigger further volatility in enterprise software stocks, as investors demand clearer evidence of AI monetization and reacceleration in growth metrics.

What to watch

Investors will watch ServiceNow's forward-deployed engineering teams for signs of AI monetization in 2027, as analysts expect an inflection point next year. Fortinet's lower service revenue guidance may pressure peers like CrowdStrike, Okta, and Palo Alto Networks, which trimmed losses during the session. Wall Street analysts will reassess valuations as companies report Q3 results, with a focus on AI contract values and subscription revenue growth.