Key takeaways
- ServiceNow shares fell about 18% after hours on October 28, according to SiliconANGLE.
- Q3 subscription revenue was $3,988 million, up 21%, and the company raised its 2026 AI contract value target to $1.7 billion.
- Q4 subscription revenue guidance of $4,245 million to $4,255 million came in below what analysts projected.
ServiceNow shares fell about 18% in after-hours trading on October 28 after the company gave a fourth-quarter revenue forecast below what analysts expected, according to SiliconANGLE. That is why ServiceNow stock is down: the quarter was fine by the company's own yardstick, but the guidance disappointed.
ServiceNow's results release, filed with the SEC on October 28, shows the company beat its own targets. The market was looking at what comes next.
What ServiceNow reported
For the third quarter ended September 30, ServiceNow reported:
- Subscription revenue of $3,988 million, up 21% from a year earlier.
- Total revenue of $4,106 million, up 20.5%.
- Current remaining performance obligations, the contracted revenue due in the next 12 months, of $13.65 billion, up 20.5%.
- 19 deals above $5 million in net new annual contract value, up more than 135%.
ServiceNow also raised its target for annual contract value from AI products to $1.7 billion for 2026, up from $1 billion at the start of the year, and said use of agentic AI in production is up more than 13 times from a year ago. It lifted its full-year free cash flow margin target by 100 basis points to 36%.
Where it fell short
According to SiliconANGLE, adjusted earnings were $1.00 a share against $1.02 expected, and revenue of $4.11 billion was about $20 million above the consensus. The gap was the outlook: ServiceNow guided fourth-quarter subscription revenue to $4,245 million to $4,255 million, while SiliconANGLE says analysts had projected $4.36 billion. SiliconANGLE's figure compares the company's subscription guidance with an analyst number for revenue, so the shortfall may be smaller than it looks; the article does not say which line analysts were modelling.
The Information described the move as a 19% drop and tied it to continued worries about software companies losing ground to AI, which it calls "SaaSpocalypse" fears. That framing is the outlet's, not ServiceNow's.
What the company says
Chief executive Bill McDermott called the quarter "the inflection point" for ServiceNow as what it calls a "Super Intelligence Control Tower". The company announced an expanded OpenAI partnership the same day, starting with a ServiceNow plugin for ChatGPT.
After-hours prices can move a lot by the next open, and we do not report a closing price here. Watch how the stock trades when the US market opens on October 29, and whether other software companies reporting this week face the same reaction to their AI outlooks.
