ServiceNow Raises Outlook and AI Target to $1.7 Billion After Q3 Beat

ServiceNow said its third-quarter results topped the high end of its own guidance on every topline growth and profitability measure, and it raised its full-year subscription revenue and free cash flow margin outlook, even as acquisition and severance costs cut GAAP profit nearly in half.

Subscription revenue rose 21% to $3.99 billion, and total revenue grew 20.5% to $4.11 billion, according to the earnings release the workflow software company filed with an 8-K on Wednesday. The company also lifted its 2026 target for AI annual contract value to $1.7 billion, which it said is up 70% from the beginning of the year.

Raised outlook

ServiceNow now expects full-year 2026 subscription revenue of $15.78 billion to $15.79 billion, representing 22.5% growth, and a free cash flow margin of 36%. CFO Gina Mastantuono said in the release that the company is "reducing capex and raising our full-year free cash flow margin target by 100 basis points to 36 percent."

For the fourth quarter, it guided to subscription revenue of $4.245 billion to $4.255 billion, up 22.5% to 23%, with a non-GAAP operating margin of 32%.

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

Bookings and backlog

Current remaining performance obligations, contract revenue expected to be recognized over the next 12 months, rose 20.5% to $13.65 billion. Total remaining performance obligations grew 22% to $29.7 billion.

The company closed 19 deals worth more than $5 million in net new annual contract value in the quarter, which it said was up more than 135% from a year earlier, and ended the period with 680 customers paying more than $5 million a year, up about 23%.

Mastantuono said customers' year-to-date consumption of agentic AI in production is up more than 13 times from a year ago.

GAAP profit falls

GAAP net income dropped to $277 million, or $0.27 a diluted share, from $502 million, or $0.48, a year earlier. GAAP operating margin narrowed to 9.5% from 17%, as amortization of purchased intangibles rose to $198 million from $33 million and severance costs climbed to $87 million from $24 million.

Excluding those and other items, non-GAAP net income rose to $1.04 billion, or $1.00 a share, from $0.95 a share. Non-GAAP operating margin was 32.5%, compared with 33.5% a year ago. Free cash flow was $822 million.

ServiceNow did not repurchase any stock in the quarter, compared with $584 million a year earlier, according to its cash flow statement.

A filing fix

The company filed an amended 8-K later the same day solely to add Inline XBRL tagging that it said was inadvertently left out of the original report. The amendment did not change any other information.

Sources

1. ServiceNow Form 8-K with third-quarter 2026 earnings release (Exhibit 99.1), filed Oct. 28, 2026 (accession 0001373715-26-000092)
2. ServiceNow Form 8-K/A adding Inline XBRL tagging to the third-quarter 2026 earnings report, filed Oct. 28, 2026 (accession 0001373715-26-000095)

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