ServiceNow’s cRPO growth guidance slows to 18.5% as shares fall
Key Facts
ServiceNow shares closed at $150.13 on October 28, down from $154.78 in the previous session, while Fortinet shares fell to $174.08 from $185, according to EL7 data. The moves followed the companies’ third-quarter results, but the figures pointed in different directions: ServiceNow posted strong revenue growth, while Fortinet raised its full-year outlook. Concern about ServiceNow centered on its forecast for slower growth in current remaining performance obligations, or cRPO, in the fourth quarter. The metric grew 20.5% in the third quarter, while the company forecast annual growth of 18.5% in the following quarter. The market’s focus was therefore on the pace of revenue set to convert into future income, rather than on characterizing the quarterly results as disappointing.
ServiceNow’s subscription revenue reached $3.988 billion in the third quarter, up 21% year over year, while total revenue rose to $4.106 billion, a 20.5% increase. Current remaining performance obligations reached $13.65 billion, also up 20.5% year over year. Although the company forecast cRPO growth slowing to 18.5% in the fourth quarter, it raised its 2026 subscription revenue outlook to between $15.780 billion and $15.790 billion. That represents expected annual growth of 22.5%. An analyst in a Bloomberg item published via Yahoo Finance noted that cRPO growth in the reported quarter was about 21% and described the following quarter’s guidance as conservative, saying the market needs "more clarity on why next-quarter guidance is conservative."
Large-deal and AI metrics offered another perspective on ServiceNow’s results. The company 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, and ended the quarter with 680 customers whose annual contracts exceed $5 million. It raised its 2026 annual contract value target for AI products to $1.7 billion, from a $1 billion target at the start of the year. The company said production consumption of agentic AI had increased more than 13 times since the start of the year compared with the same period. CEO Bill McDermott linked accelerating AI adoption to remaining performance obligations reaching $30 billion and growing 23%. These indicators put expansion in contracts and new products alongside the expected slowdown in cRPO growth in the fourth quarter.
Fortinet, meanwhile, reported third-quarter total revenue of $2.08 billion, up 20% year over year, while product revenue rose 37% to $765 million. Billings grew 29% to $2.34 billion, and the non-GAAP operating margin was about 38%. The company raised its 2026 revenue growth outlook to 20% year over year and lifted its annual billings guidance for the third time this year. Founder and CEO Ken Xie said the results reflected "strong execution and broad demand across our entire portfolio." He added that the performance enabled the company to raise its annual billings forecast again. Fortinet also announced a $1.2 billion increase in its share repurchase authorization.
Fortinet forecast fourth-quarter revenue of between $2.155 billion and $2.245 billion and billings of between $2.775 billion and $2.925 billion. Separately from the software companies’ results, Alphabet reported third-quarter revenue of $127.58 billion, up 25% year over year, but below the average analyst estimate of $127.97 billion. Revenue from Google Search and other advertising rose 12% to $63.3 billion, while YouTube advertising revenue increased 9% to $11.2 billion. By contrast, Google Cloud revenue jumped 103% to $30.7 billion. The company’s CEO described its annual revenue run rate as having reached "half a trillion dollars."