ServiceNow shares fall to $102.76 on Nov. 9 as investors watch for slower growth in near-term obligations
Key Facts
ServiceNow shares closed at $102.76 on Nov. 9, in a session for which verified data on the high and low prices or the reason for the share move was unavailable. The company had reported third-quarter results on Oct. 28, posting total revenue of $4.106 billion, up 20.5% year over year. Those results provide context on the company’s performance ahead of the November session, but do not establish that the results or guidance caused the share move on Nov. 9. In its fourth-quarter outlook, ServiceNow paired strong subscription revenue growth with a slower pace of growth in near-term contractual obligations. The divergence highlights the importance of distinguishing recognized revenue from demand indicators that may convert into revenue later.
Subscription revenue was $3.988 billion in the third quarter, up 21% year over year, according to the earnings release. It had been $3.877 billion in the second quarter, while current remaining performance obligations then stood at $13.20 billion as of June 30. As of Sept. 30, current remaining performance obligations, or cRPO, reached $13.65 billion, up 20.5% year over year. The metric measures contracted revenue the company expects to recognize over the following twelve months. The move from second-quarter to third-quarter figures puts quarterly subscription growth in context, while cRPO links existing contracts to revenue expected to be recognized later.
ServiceNow forecast fourth-quarter subscription revenue of $4.245 billion to $4.255 billion, with year-over-year growth of 22.5% to 23%, or 21.5% in constant currency. By contrast, it expected cRPO growth of 18.5%, both year over year and in constant currency. An Investing.com report put fourth-quarter revenue at about $4.25 billion to $4.26 billion, compared with analyst consensus of $4.36 billion, and said the revenue outlook came in below consensus. The report also described expected cRPO growth, which it put at about 18%, as a concern for investors because it signaled slowing momentum in contracted revenue. That puts the company’s subscription outlook for the fourth quarter, with stated growth above 22%, alongside a contractual metric whose growth is slowing from the obligations level recorded at the end of the third quarter.
The subscription and cRPO outlooks reflect two sides of the operating picture: expected subscription revenue growth above 22%, against expected near-term obligations growth of 18.5%. Current obligations had posted year-over-year growth of 20.5% as of Sept. 30, making fourth-quarter guidance slower than the growth rate recorded for that metric in the third quarter. Subscription revenue, meanwhile, grew 21% year over year in the third quarter, while fourth-quarter guidance calls for growth of 22.5% to 23%. The comparison does not mean one metric cancels out the other; the first tracks contracted revenue expected over the following twelve months, while the second gives a range for subscription revenue in the next quarter. The near-term growth picture therefore intersects with the company’s expected subscription revenue in the fourth quarter.
After the results and outlook were announced, the stock fell 18.7% in premarket trading on Oct. 29 to $122, according to Investing.com. BMO Capital cut its price target to $155 from $165, while maintaining an Outperform rating. The firm said ServiceNow’s guided cRPO growth came in about 50 basis points below its estimate. BMO added that it saw the guidance as potentially reflecting some conservatism, a less bearish reading than the impact of the steep premarket decline. Those moves and assessments relate to the Oct. 29 session and the results reported around that date; on their own, they do not establish the reason shares closed at $102.76 on Nov. 9.
On liquidity, ServiceNow raised its 2026 free cash flow margin forecast to 36%. The target adds an annual indicator to the fourth-quarter picture, pointing to an expected higher free cash flow margin for the year alongside projected subscription growth of 22.5% to 23%. The company also raised its 2026 annual contract value target for AI contracts to $1.7 billion. In its filing, it said customers’ consumption of agentic AI in production environments since the start of the year had increased more than 13 times year over year. The disclosure puts adoption of AI tools in the context of expanding activity, without changing the reported figures for fourth-quarter subscription revenue or cRPO guidance.
Chief Executive Bill McDermott described the third quarter as a turning point for the company, linking growth in its hybrid model to rising AI adoption. He said remaining obligations totaled $30 billion and grew 23% in the third quarter. That figure refers to total remaining obligations, according to McDermott, while cRPO—the portion expected to be recognized over the following twelve months—was $13.65 billion. Separating the two metrics allows a view of total contract volume alongside nearer-term contracted revenue. The company’s next guidance is for the fourth quarter of 2026: subscription revenue of $4.245 billion to $4.255 billion and cRPO growth of 18.5%, with execution to be measured against those stated ranges.