ServiceNow announced its first quarter earnings yesterday, beating consensus Wall Street forecasts for revenue and exceeding the high end of its own guidance across almost every top-line and profitability metric. The company’s adjusted earnings per share came in exactly where consensus analyst estimates thought they would. McDermott raised full-year subscription revenue forecasts, and predicted that sales of the company’s AI products would blow through prior projections and end up at close to $1.5 billion for 2026, a figure 50% higher than his prior forecasts.

And yet the stock got crushed in after-hours trading. Investors drove the shares down as much as 14%, with the stock sliding further just after the opening bell on Thursday.

That comes on top of a brutal 45% decline over the past six months. Santa Clara–based ServiceNow has been one of the biggest losers of the so-called SaaSpocalypse, the idea that increasingly capable AI agents from the likes of Anthropic and OpenAI will mean customers will make fewer software purchases from traditional vendors, denting their growth prospects.

That narrative has been hard to shake, despite there being little empirical evidence for the thesis so far and the fact that plenty of economists, enterprise tech analysts, and tech CEOs—including AI boosters such as Nvidia CEO Jensen Huang—think the narrative is wrong.

On Wednesday, investors seem to have seized on one line in particular in ServiceNow’s earnings release as a rationale for continuing to dump the stock. That line was an acknowledgement that economic uncertainty caused by the Iran war has made it harder to close some customers, resulting in a 0.75% reduction in subscription sales growth compared with what the company thought it was going to be able to do in the quarter. This meant that the company’s “current remaining performance obligation” (or cRPO, which measures future sales that have been contracted for the current year but not yet delivered) wound up narrowly missing what analysts had expected.

But investors ignored that overall subscription revenue had still expanded at 22% to $3.77 billion in the quarter, a solid figure that beat consensus forecasts and represented an acceleration in growth from prior quarters. And while it remains far from clear how long tumult in the Middle East will last, that drag on growth is likely to vanish at some point in the coming quarters.

Overall, the company said it made $1.012 billion in adjusted net income, or 97 cents per share, which was in line with consensus forecasts from Wall Street analysts.

Bill McDermott, ServiceNow’s CEO, told Fortune in an interview on Wednesday, prior to the release of the company’s earnings, that he believed the negative vibes on Wall Street were starting to dissipate.

“They’re learning that ServiceNow is an AI platform,” he said. He added that the company’s products, which include ways to monitor and govern AI agents from both ServiceNow and other providers, could be “the rules and rails of modern business.”

He called the SaaSpocalypse idea—that large corporations would want to replace all their long-standing software vendors with more DIY offerings built on AI models—“a parlor trick” that few customers were actually falling for. AI agents weren’t replacing traditional software, but rather reinforcing its value, he said. “There are two worlds that are integrating. They are not taking each other out. They are cooperating.”

He also said that customers liked that ServiceNow could provide predictability in both how its AI agents performed and, critically, in how they were priced. The company currently offers a hybrid pricing model, where some services are sold on a traditional seat license basis, while others, particularly its newer AI offerings, are priced by usage. “They get the best of both worlds—the non-seat-based pricing innovation, including tokens and assets and infrastructure, hardware and connectors, things like that. But they get the predictability also that comes with the long-standing relationship that they have.”

Among the most closely watched figures in ServiceNow’s earnings release was an update on Now Assist, which is what the company calls its AI product suite. The company said the number of Now Assist customers spending more than $1 million in annual contract value grew more than 130% year over year. (In the fourth quarter of 2025, the company had said there were about 35 customers in that category.) McDermott told Fortune the company is poised to overshoot the roughly $1 billion 2026 AI revenue target it set out in January. “That’s going to blow past a billion and a half,” he said. “So we’re going to have to up that by more than $500 million. It’s just unreal.”

Overall, ServiceNow said its products were selling strongly. ServiceNow closed 16 transactions worth over $5 million in net new annual contract value in the quarter, nearly 80% more than a year earlier, and ended the quarter with 630 customers spending more than $5 million a year—up roughly 22% year over year. More customers were also buying more of ServiceNow’s various offerings. The number of deals that saw customers buying three or more ServiceNow products climbed 70% year over year, the company said, with 36 deals including five or more products.

ServiceNow also said that it had closed two cybersecurity-focused acquisitions that McDermott has positioned as central to the company’s AI pitch. It completed its purchase of identity and access-governance company Veza on March 2, and on April 20 closed its roughly $7.75 billion acquisition of Armis, an Israeli cyber-exposure and asset-discovery company. (The Veza acquisition price has not been disclosed but is thought to be over $1 billion.)

McDermott said that AI was supercharging cyberattacks, as the recent concern about the capabilities of Anthropic’s Mythos model highlighted. And that, in turn, should drive adoption of ServiceNow’s tools for monitoring network activity and controlling what both people and AI agents can do across customers’ systems as well as automated tools for dealing with alerts and potential security breaches, he said.