ServiceNow (NYSE:NOW) Posts Quarterly Earnings Results, Misses Expectations By $0.02 EPS

ServiceNow (NYSE:NOW) announced its quarterly earnings results on Wednesday. The information technology services provider reported $1.00 EPS for the quarter, missing the consensus estimate of $1.02 by ($0.02), FiscalAI reports. ServiceNow had a net margin of 9.36% and a return on equity of 15.38%. The company had revenue of $4.11 billion during the quarter, compared to analyst estimates of $4.09 billion. During the same period in the prior year, the firm earned $4.82 EPS. ServiceNow’s quarterly revenue was up 20.5% compared to the same quarter last year.

Here are the key takeaways from ServiceNow’s conference call:

• Q3 exceeded guidance across key metrics: subscription revenue grew 20.5% in constant currency, cRPO grew 21%, operating margin reached 32.5%, and free-cash-flow margin was 20%. The company also reported 19 deals with more than $5 million in net-new ACV, up 135% year over year.
• AI monetization accelerated materially. AI net-new ACV grew 65% year over year, $1 million-plus AI deals increased 4.5 times, agentic AI consumption in production rose 13 times, and ServiceNow raised its 2026 AI ACV target to at least $1.7 billion.
• ServiceNow is increasingly positioning its Control Tower and Action Fabric as the governance and execution layer for enterprise AI, supported by expanded partnerships with OpenAI, Google, NVIDIA, Okta, and other ecosystem providers. Management said consumption-based usage is growing rapidly while customers retain predictable subscription pricing.
• The company raised its full-year free-cash-flow margin target by 100 basis points to 36% and expects 21% constant-currency subscription-revenue growth for 2026. Internal AI usage is generating more than $1 billion in annualized value, helping offset hiring needs while allowing continued investment in AI engineering and quota-bearing sales personnel.
• Q4 cRPO growth is expected to slow to 18.5% in constant currency, reflecting early renewals pulled into Q3, a higher mix of on-premise public-sector deals, and the accounting treatment of deployment services and T4C backlog. Management argued these factors should still contribute to revenue, but the softer cRPO outlook contributed to investor concerns.

ServiceNow Stock Performance

NYSE:NOW traded down $2.48 during mid-day trading on Friday, reaching $107.19. 6,605,323 shares of the company’s stock were exchanged, compared to its average volume of 21,522,289. ServiceNow has a one year low of $81.24 and a one year high of $189.53. The business’s fifty day simple moving average is $139.20 and its two-hundred day simple moving average is $115.64. The firm has a market capitalization of $110.83 billion, a PE ratio of 77.04, a price-to-earnings-growth ratio of 2.75 and a beta of 0.99. The company has a debt-to-equity ratio of 0.43, a quick ratio of 0.70 and a current ratio of 0.70.

Analyst Upgrades and Downgrades

A number of equities research analysts have commented on the stock. Evercore reissued an “outperform” rating on shares of ServiceNow in a report on Tuesday, October 13th. Mizuho set a $165.00 price target on ServiceNow in a research note on Thursday. BTIG Research dropped their price objective on ServiceNow from $170.00 to $150.00 and set a “buy” rating on the stock in a research note on Thursday. Cantor Fitzgerald upped their price target on shares of ServiceNow from $174.00 to $201.00 and gave the company an “overweight” rating in a report on Monday. Finally, Bank of America raised their target price on shares of ServiceNow from $130.00 to $150.00 and gave the company a “buy” rating in a research report on Wednesday, August 19th. One investment analyst has rated the stock with a Strong Buy rating, thirty-six have issued a Buy rating, three have issued a Hold rating and three have assigned a Sell rating to the stock. According to MarketBeat.com, ServiceNow has a consensus rating of “Moderate Buy” and a consensus price target of $154.50.

Key ServiceNow News

Here are the key news stories impacting ServiceNow this week:

• Positive Sentiment: ServiceNow reported third-quarter revenue of $4.11 billion, up 20.5% year over year and above the $4.09 billion consensus estimate. Subscription revenue reached $3.99 billion, while management raised its 2026 AI contract-value target to $1.7 billion. NOW Q3 Earnings Lag Estimates, Revenues Rise on Subscription Growth
• Positive Sentiment: The expanded OpenAI partnership, a five-year HPE agreement and ServiceNow’s Control Tower Alliance reinforce the company’s positioning in enterprise AI workflows, governance and cybersecurity. ServiceNow and OpenAI accelerate enterprise AI
• Positive Sentiment: Several analysts remain constructive despite reducing price targets. JPMorgan raised its target to $160 and maintained an overweight rating, while Piper Sandler, Wells Fargo and Oppenheimer also retained bullish ratings. Some analysts view the sell-off as an opportunity if AI-related revenue accelerates in 2027. ServiceNow stock is on track for its largest drop
• Neutral Sentiment: Historical analysis suggests ServiceNow shares often recovered six months after large one-day declines, but the current sell-off is occurring amid broader concerns that AI could disrupt traditional software business models. ServiceNow Stock Just Plunged More Than 20% in a Single Day
• Negative Sentiment: Adjusted EPS was $1.00, below the $1.02 consensus estimate. More importantly, fourth-quarter current remaining performance obligation growth is expected to slow to about 18.5%, below the roughly 21.5% revenue-growth outlook. Investors interpreted the bookings outlook as an early warning for future subscription growth. ServiceNow Guides to Slower Backlog Growth
• Negative Sentiment: ServiceNow’s AI investments are pressuring gross margins, while $7.52 billion of debt and rising interest costs add financial risk. A securities-law investigation notice and growing competition from AI-focused startups are additional sentiment headwinds. ServiceNow’s Debt and Interest Costs Jump

Insider Activity

In related news, Director Paul Chamberlain sold 2,700 shares of ServiceNow stock in a transaction that occurred on Thursday, August 27th. The shares were sold at an average price of $135.50, for a total transaction of $365,850.00. Following the sale, the director directly owned 43,990 shares of the company’s stock, valued at approximately $5,960,645. The trade was a 5.78% decrease in their position. The sale was disclosed in a document filed with the SEC, which is available through this hyperlink. Also, insider Paul Fipps sold 2,034 shares of ServiceNow stock in a transaction on Monday, August 31st. The stock was sold at an average price of $147.87, for a total transaction of $300,767.58. Following the transaction, the insider owned 18,305 shares in the company, valued at approximately $2,706,760.35. This trade represents a 10.00% decrease in their position. The disclosure for this sale is available in the SEC filing. In the last ninety days, insiders sold 14,081 shares of company stock worth $1,937,904. 0.34% of the stock is currently owned by corporate insiders.

About ServiceNow

ServiceNow, Inc provides cloud-based software designed to help organizations digitize, automate and manage enterprise workflows. Its Now Platform connects people, processes and systems across departments, enabling customers to manage work through a centralized technology environment.

The company’s products and services address a range of business needs, including information technology service management, IT operations management, customer service management, human resources service delivery, security operations, risk and compliance, and application development.