ServiceNow misses Q3 profit estimates, shares drop 17.9% after hours

ServiceNow, Inc. (NOW) reported third-quarter 2026 total revenue of $4.106 billion, up 20.5% from a year earlier, and adjusted diluted earnings of $1.00 per share. Adjusted earnings missed the $1.03 consensus estimate compiled by Finnhub, while revenue was in line with the $4.14 billion estimate.

Shares dropped 17.9% in after-hours trading as of 5:30 p.m. ET, from a regular-session close of $150.05.

The company said in a press release attached to its 8-K filing on Oct. 28 that it raised its full-year subscription revenue and free cash flow margin outlook.

Here's how the company did:

• Adjusted diluted EPS: $1.00 vs. $0.95 a year earlier, missing the $1.03 consensus estimate according to Finnhub
• Total revenue: $4.106 billion vs. $3.407 billion a year earlier
• Subscription revenue: $3.988 billion vs. $3.299 billion a year earlier, up 21%
• Free cash flow: $822 million vs. $592 million a year earlier

Subscription revenue grew 21% and 20.5% in constant currency, the company said. Current remaining performance obligations, or cRPO, which is contract revenue expected to be recognized in the next 12 months, reached $13.65 billion, up 20.5% from a year earlier.

Total remaining performance obligations reached $29.7 billion, up 22% from a year earlier.

Revenue has risen in each of the last three quarters, from $3.41 billion to $3.99 billion, according to its SEC filings.

2026 guidance

The company raised its 2026 subscription revenue forecast to $15.78 billion to $15.79 billion on a GAAP basis, from the $15.76 billion to $15.78 billion range it gave on July 22.

It raised its full-year free cash flow margin target to 36%, from 35% in July. For the fourth quarter, it expects GAAP subscription revenue of $4,245 million to $4,255 million, or growth of 22.5% to 23%.

It left its full-year non-GAAP operating margin forecast at 31.5%, the same as the July range.

President and CFO Gina Mastantuono said, “Importantly, we are capturing this significant opportunity with a capital-efficient model, reducing capex and raising our full-year free cash flow margin target by 100 basis points to 36 percent.”

Chairman and CEO Bill McDermott said, “This was more than another beat-and-raise quarter for ServiceNow, this was the inflection point for ServiceNow as the Super Intelligence Control Tower.”

Costs and charges

GAAP income from operations was $385 million, a 9.5% operating margin, down from $572 million a year earlier.

Non-GAAP income from operations was $1.338 billion, up from $1.140 billion, though its margin was 32.5% against 33.5%.

Severance costs were $87 million, against $24 million a year earlier. Amortization of purchased intangibles was $198 million, up from $33 million.

GAAP net income was $277 million, or 27 cents per share, against $502 million, or 48 cents per share, a year earlier.

Cash and capital returns

Operating cash flow was $839 million in the quarter. The company spent $9.17 billion on business combinations, net of cash acquired, in the first nine months.

It made no share repurchases in the quarter, against $584 million a year earlier. Short-term debt stood at $2.09 billion and long-term debt at $5.44 billion at Sept. 30.