ServiceNow stock lifts AI target as Q3 growth stays strong

ServiceNow released its third-quarter results on Wednesday, October 28, with subscription revenue of 3.988 billion US dollars, according to the company's investor release. Revenue from subscriptions rose 21 percent year over year, or 20.5 percent at constant currency, while total revenue increased 20.5 percent to 4.106 billion US dollars.

Management lifted its 2026 AI annual contract value target to 1.7 billion US dollars, up from 1 billion at the start of the year. President and Chief Financial Officer Gina Mastantuono said AI net new annual contract value exceeded expectations and that customer consumption of agentic AI in production had increased more than 13-fold year over year.

Growth remains strong, expectations rise

ServiceNow also reported current remaining performance obligations of 13.65 billion US dollars at September 30, up 20.5 percent year over year. Total remaining performance obligations reached 29.7 billion US dollars, an increase of 22 percent. The company closed 19 transactions above 5 million US dollars in net new annual contract value during the quarter, while the number of customers with more than 5 million US dollars in annual contract value reached 680.

The figures combine strong demand with a more demanding forward comparison. ServiceNow expects current remaining performance obligations to grow 18.5 percent in the fourth quarter, below the third-quarter pace. Fourth-quarter subscription revenue guidance is 4.245 billion to 4.255 billion US dollars, equivalent to 21.5 percent growth at constant currency.

For the full year, the company now expects subscription revenue of 15.780 billion to 15.790 billion US dollars and a non-GAAP free-cash-flow margin of 36 percent. The margin target is one percentage point above the previous outlook, with management citing lower capital spending and a capital-efficient approach to AI investment.

Profitability and cash flow in focus

Non-GAAP operating income was 1.338 billion US dollars in the third quarter, producing a 32.5 percent operating margin. Non-GAAP free cash flow was 822 million US dollars, compared with 592 million US dollars a year earlier, while the free-cash-flow margin was 20 percent. The adjusted figures exclude items such as stock-based compensation, amortization of purchased intangibles, business-combination costs and severance.

GAAP net income was 277 million US dollars, or 0.27 US dollars per diluted share, compared with 502 million US dollars, or 0.48 US dollars per diluted share, in the year-earlier quarter. The difference between the GAAP and non-GAAP results remains relevant for investors because ServiceNow continues to carry sizeable compensation and acquisition-related adjustments.

ServiceNow stock traded at 93.48 euros on Lang & Schwarz at 14:39 CET on Tuesday, November 3, 2026. Investors are likely to focus next on whether the expanding AI contract pipeline can offset the slower expected cRPO growth and support the company's medium-term growth profile.

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