ServiceNow Beats Q3 Guidance, Raises 2026 FCF Margin to 36% and AI ACV Target to $1.7B
NOW sits 58% above its 52-week low of $81.24.
Summary
ServiceNow beat the high end of Q3 guidance with subscription revenue of $3,988 million (up 21%) and raised its 2026 free cash flow margin target to 36% and its AI annual contract value target to $1.7 billion. GAAP operating margin compressed to 9.5% on acquisition and stock-compensation costs, while non-GAAP margin held at 32.5%.
Key Events · Earnings and Guidance · NOW
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Q3 Beat Across Every Guided Metric
Subscription revenues of $3,988 million grew 21% year-over-year (20.5% constant currency) and total revenues of $4,106 million grew 20.5%, beating the high end of guidance on topline growth and profitability.
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Full-Year Targets Raised
Full-year 2026 subscription revenue guidance is $15,780-$15,790 million (22.5% growth) and the free cash flow margin target was raised 100 basis points to 36%; Q4 subscription revenue is guided to $4,245-$4,255 million, up 22.5%-23%.
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AI ACV Target Raised to $1.7B
The 2026 AI annual contract value target was raised for the second time this year, from $1 billion at the start of the year to $1.7 billion, with year-to-date agentic AI consumption in production up more than 13x year-over-year.
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Backlog Growth Confirms Demand
RPO reached $29.7 billion, up 22% year-over-year, and cRPO $13.65 billion, up 20.5%; the company booked 19 deals over $5 million in net new ACV, up over 135%, and ended the quarter with 680 customers above $5 million in ACV, up about 23%.
Analysis · NOW · Technology
ServiceNow beat the high end of its own Q3 guidance on every topline and profitability metric and raised full-year targets — subscription revenue growth of 22.5% and a free cash flow margin lifted 100 basis points to 36%. The AI number is the one that matters: the 2026 AI annual contract value target went from $1 billion at the start of the year to $1.7 billion, a second raise this year, with agentic AI consumption in production up more than 13x year-over-year. Backlog supports the pace — RPO of $29.7 billion is up 22% and cRPO of $13.65 billion up 20.5%, so the growth is contracted, not hoped for. The offset is margin: GAAP operating margin fell to 9.5% from 17% a year ago as stock-based compensation and acquired-intangible amortization from the $9.2 billion of acquisitions in the first nine months swelled, and interest expense turned to $81 million from $6 million on the new debt. Non-GAAP operating margin held at 32.5%, so the gap is accounting and deal integration rather than a deterioration in the underlying business.
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At the time of this filing, NOW was trading at $128.59 on NYSE in the Technology sector, with a market capitalization of approximately $155.2B. The 52-week trading range was $81.24 to $192.97. This filing was assessed with positive market sentiment and an importance score of 7 out of 10.