ServiceNow drops sharply after hours as Q4 backlog guide of 18.5% overshadows a raised AI target
Q3 revenue rose 20.5% to $4.11 billion and subscription revenue grew 21%, but adjusted EPS of $1.00 was a cent or two below estimates and the company guided current backlog growth down to 18.5% for the fourth quarter.
ServiceNow (NOW) reported third-quarter results after Wednesday’s close. Revenue was roughly in line with forecasts, but the stock fell sharply in extended trading because of a slower backlog outlook.
| Item | Q3 2026 | Note |
|---|---|---|
| Total revenue | $4.106B (+20.5%) | about $4.09B–4.10B expected (S&P Global data cited by StockStory; PANews) |
| Subscription revenue | $3.988B (+21%) | 20.5% in constant currency |
| EPS | GAAP $0.27 / adjusted $1.00 | about $1.02 expected (same sources) |
| Non-GAAP operating margin | 32.5% | GAAP 9.5% |
| cRPO (12-month backlog) | $13.65B (+20.5%) | total RPO $29.7B (+22%) |
| Free cash flow | $822M | 20% margin |
Guidance:
- Q4 subscription revenue: $4.245B–4.255B (+22.5% to 23%)
- Q4 cRPO growth: 18.5%, slower than this quarter’s 20.5%
- Q4 non-GAAP operating margin: 32%
- Full-year 2026 subscription revenue: $15.78B–15.79B
- Full-year free cash flow margin: raised to 36% from 35%
- AI target: the 2026 goal for AI annual contract value was raised to $1.7 billion, from $1 billion at the start of the year.
Why it matters: cRPO is the closest thing to a forward order book for subscription software. Investors read the step-down to 18.5% as a sign that AI tools could be eating into demand for traditional seat-based software, even as ServiceNow’s own AI sales grow faster than planned. Reports put the extended-trading drop at roughly 14% to 17%. The stock had already lost about 4% during the regular session ahead of the report.
Market reaction: the slide came on the same evening that Microsoft rose after hours on Azure growth and Alphabet fell on a profit miss. That leaves software sentiment split heading into Thursday’s open.
Next: Thursday’s regular-session move, and further software and chip reports this week, including Intel on Thursday evening.
Sources
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