ServiceNow’s Current Remaining Performance Obligations Growth Guidance Slows to 18.5% as Shares Fall 17.11%
Key Facts
ServiceNow reported total revenue of $4.106 billion in the third quarter of 2026, up 20.5% year over year, while growth was 20% in constant currency, according to the company’s statement. Subscription revenue was $3.988 billion, up 21% year over year and 20.5% in constant currency. Total revenue exceeded analysts’ estimate of $4.09 billion, according to Investing.com’s coverage of the company’s results. But adjusted earnings per share came to $1.00, below estimates of $1.02. After closing at $150.13 in the Oct. 28 session, the stock fell 17.11% in after-hours trading to $124.45, according to the same source.
Contract metrics showed continued growth in contracted business, with remaining performance obligations totaling $29.7 billion as of September 30, up 22% year over year. Current remaining performance obligations reached $13.65 billion, up 20.5% year over year. ServiceNow said revenue from these current obligations is expected to be recognized over the next twelve months. By contrast, the company expects current remaining performance obligations growth of 18.5% in the fourth quarter. That guidance follows growth of 20.5% in the third quarter, indicating a slowdown in the pace of growth for this metric in the coming period.
ServiceNow recorded 19 deals in the third quarter, each with new annual contract value exceeding $5 million, an increase of more than 135% year over year. It ended the period with 680 customers whose annual contract value exceeds $5 million, up about 23% from the previous year. Customer consumption of agentic AI in production environments has risen since the start of the year to more than 13 times its level a year earlier, Chief Financial Officer Gina Mastantuono said. AI annual contract value had exceeded $1 billion in the second quarter of 2026. Agentic AI deployments also increased ninefold during the nine months through that quarter, the company said.
For the fourth quarter, the company expects subscription revenue of between $4.245 billion and $4.255 billion, and year-over-year growth of between 22.5% and 23%. It also set current remaining performance obligations growth at 18.5% and a non-GAAP operating margin of 32%. For full-year 2026, ServiceNow raised its free cash flow margin target by 100 basis points to 36%. The company said lower capital expenditures support the higher target. The guidance pairs subscription and current remaining performance obligations growth with a higher annual free cash flow margin target.
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 $1.039 billion, with diluted earnings per share on that basis of $1.00. ServiceNow also announced an expansion of its partnership with OpenAI to enable governed workflows within ChatGPT through the ServiceNow connector. The company plans to make OpenAI-powered security capabilities available in early January 2027, with general availability targeted for the second quarter of 2027. It also expects to make Codex integration available in AI Workflow Factory during 2027.