Key points
- ServiceNow's adjusted profit came in 2 cents below estimates
- ServiceNow forecasts 18.5% cRPO growth for the fourth quarter
- Truist and Morgan Stanley cut their ServiceNow price targets
ServiceNow (NOW) said on Oct. 28 that third-quarter adjusted earnings came in at $1.00 a share, 2 cents below the analyst estimate reported by Investing.com. The company also forecast slower growth in contracted revenue for the fourth quarter. The shares fell 25.5% to $111.89 as of 11:37 a.m. ET on Oct. 29, on pace for the stock's worst day since it began trading in 2012.
Subscription revenue rose 21% to $3.99 billion, above the top of the company's own forecast range, according to its earnings release. ServiceNow also raised its full-year subscription revenue forecast to between $15.78 billion and $15.79 billion.
ServiceNow expects current remaining performance obligations, the contracted revenue it expects to recognize over the next 12 months, to grow 18.5% in constant currency. That compares with 21% in the third quarter.
| Metric | Q3 2026 | Change from a year earlier |
|---|---|---|
| Subscription revenue | $3.988 billion | +21% |
| Total revenue | $4.106 billion | +20.5% |
| Contracted revenue expected within 12 months (cRPO) | $13.65 billion | +20.5% (+21% in constant currency) |
| Adjusted earnings per share | $1.00 | up from $0.95 |
| GAAP earnings per share | $0.27 | down from $0.48 |
Source: ServiceNow third-quarter 2026 earnings release, Oct. 28, 2026.
ServiceNow says early renewals pulled deals out of the fourth quarter
President and Chief Financial Officer Gina Mastantuono said on the earnings call that "we saw strong early renewals in Q3 that contributed about half of the beat in Q3." She added, "That has a negative impact in Q4 because we pulled those deals out of Q4 and into Q3."
She also cited a higher share of on-premises deals, where customers run the software on their own servers. "Strong public sector demand is driving higher on-prem mix in Q4, which is actually a great result," Mastantuono said.
Analysts cut their price targets
Truist Securities cut its price target to $150 from $180 and kept a Buy rating. Truist cited the softer fourth-quarter outlook for contracted revenue, which it said creates "a lower starting point for fiscal year 2027." The firm also called ServiceNow's AI business "too small to inflect the overall growth of the company."
Morgan Stanley lowered its target to $160 from $180 and kept an Overweight rating, pointing to the drop from 21% growth to 18.5%.
Analysts asked about AI and per-user pricing
ServiceNow raised its target for annual contract value from AI products to $1.7 billion for 2026, up from $1 billion at the start of the year, according to the release. On the call, Arjun Bhatia of William Blair asked "whether AI is cannibalistic or accretive to software companies."
Chairman and Chief Executive Bill McDermott answered that "all the business cases that are tied to return on invested capital from AI are a factor 10x greater than anything that preceded AI solutions."
On the same call, ServiceNow said its use of AI is reducing its hiring needs. Asked by Peter Weed of Bernstein about headcount, Mastantuono said the company has "crossed $1 billion in efficiency gains through our own internal use of AI" and that those gains mean "we're able to not hire as many people." McDermott said ServiceNow's headcount "has actually slightly declined."
ServiceNow uses what management calls a hybrid pricing model, combining per-user fees, often called seats, with charges based on usage. Asked by Brad Zelnick of Deutsche Bank about pricing tied to outcomes, McDermott said "the customer likes the predictability of the seat-based pricing model for their budgeting purposes." Mastantuono said customers are "quite happy with the hybrid model that we have today."
The stock has fallen 27% this year
ServiceNow ended 2025 at $153.19 and closed at $150.13 on Oct. 28. At $111.89 on Oct. 29, it was down 27% for the year. Its biggest one-day drop before Oct. 29 was 17.75%, on April 23, 2026, when the shares closed at $84.78. The stock's lowest close this year was $83.00, on April 10.
In the earnings release, McDermott called the quarter "more than another beat-and-raise quarter for ServiceNow."
