ServiceNow’s Current Obligations Growth Guidance Falls to 18.5% in the Fourth Quarter
Key Facts
ServiceNow reported total revenue of $4.106 billion in the third quarter of 2026, up 20.5% year over year, while subscription revenue rose 21% to $3.988 billion, according to the company’s results. By contrast, the company forecast current remaining performance obligations, or cRPO, growth of 18.5% in the fourth quarter, after 20.5% growth in the third quarter. The metric measures revenue from contracts that the company expects to recognize over the following twelve months. Investing.com reported adjusted earnings per share of $1.00, below analysts’ estimate of $1.02, while revenue exceeded the estimate of $4.09 billion. The stock closed at $150.13 in regular trading on October 28, before falling 17.11% after hours to $124.45, according to the same report.
Current remaining performance obligations stood at $13.65 billion on September 30, up 20.5% year over year, while total remaining performance obligations reached $29.7 billion, a 22% increase, according to a ServiceNow statement. These figures indicate the value of contracted business that has not yet converted into reported revenue. But cRPO growth guidance of 18.5% for the fourth quarter points to a slower pace for this metric than in the third quarter. The company set fourth-quarter subscription revenue at between $4.245 billion and $4.255 billion, with year-over-year growth of between 22.5% and 23%. It also forecast a non-GAAP operating margin of 32% for the quarter. The guidance thus combines continued subscription growth at a faster pace than cRPO with an expected slowdown in the metric covering revenue close to recognition.
Large deals expanded during the quarter, with ServiceNow recording 19 deals in which the net new annual contract value exceeded $5 million each, an increase of more than 135% year over year. The company ended the period with 680 customers whose annual contract value exceeded $5 million each, up about 23% from a year earlier. The chief financial officer said customer consumption of agentic AI in production environments had risen more than 13-fold year over year since the start of the year. The company also raised its year-end 2026 annual contract value target for AI products to $1.7 billion, up 70% from the start of the year. In the second quarter, the company had said the annual contract value of ServiceNow AI exceeded $1 billion and that its agentic deployments had increased ninefold over the nine months through that quarter.
ServiceNow also raised its full-year 2026 free cash flow margin target by 100 basis points to 36%. The company said lower capital expenditures supported the increase. In its third-quarter results, net income under GAAP was about $277 million, and diluted earnings per share were $0.27. Non-GAAP net income was about $1.039 billion, and diluted earnings per share on that basis were $1.00. These results show a significant difference between the two reported profitability measures, while Investing.com’s report showed adjusted earnings per share below the analysts’ estimate it cited. Total revenue exceeded the $4.09 billion estimate cited in the report, according to the same source.
ServiceNow announced an expansion of its partnership with OpenAI to help companies move from AI reasoning to governed action execution. The announcement comes alongside the higher AI product contract target and strong growth in customer consumption of agentic AI. The available information did not include a date for the company’s next earnings announcement or a related event. The next operating dates in the guidance therefore remain the fourth quarter of 2026, for which the company set subscription revenue and cRPO growth ranges, and year-end 2026 for its AI contract value target. The full-year free cash flow margin target is 36% after a 100-basis-point increase.