Why Is ServiceNow Stock Falling 18.7% in Premarket Trading?

ServiceNow (NYSE:NOW) shares declined 18.7% to $122 in premarket trading on Thursday after the enterprise software company reported third-quarter 2026 adjusted earnings below analysts’ expectations and issued fourth-quarter revenue guidance that fell short of market forecasts.

The company reported adjusted earnings per share of $1.00, compared with the consensus estimate of $1.02, marking its first adjusted earnings miss in six quarters. ServiceNow also projected fourth-quarter revenue of between $4.25 billion and $4.26 billion, below analysts’ expectations of $4.36 billion.

The results included a decline in GAAP operating margin and a forecast indicating slower growth in contracted revenue obligations, although the company raised its full-year artificial intelligence annual contract value target to $1.7 billion.

What Is Behind ServiceNow’s Premarket Share Price Decline?

ServiceNow shares fell 18.7% to $122 before Thursday’s market opening following the release of its third-quarter financial results after Wednesday’s closing bell.

The company reported adjusted earnings per share below analysts’ expectations and provided fourth-quarter revenue guidance that was lower than the market consensus.

The share price decline began during Wednesday’s after-hours trading, when ServiceNow shares fell more than 17%.

The movement continued into Thursday’s premarket session, following an approximately 3% decline during the regular trading session on October 28.

Investors were assessing the company’s earnings performance, revenue outlook, operating margins and expectations for future contracted revenue growth.

Why Did ServiceNow’s Third-Quarter Earnings Miss Expectations?

ServiceNow reported adjusted earnings per share of $1.00 for the third quarter of 2026.

Analysts had forecast adjusted earnings of $1.02 per share, leaving the reported figure $0.02 below expectations.

The result marked the company’s first adjusted earnings-per-share miss in six quarters.

Acquisition-related expenses and lower interest income contributed to the difference between reported earnings and analysts’ forecasts.

ServiceNow also reported a decline in its GAAP operating margin, which fell to approximately 9.5% from around 17% in the corresponding period a year earlier.

The decrease of approximately 7.5 percentage points reflected the impact of higher expenses on reported operating profitability.

What Is ServiceNow Forecasting for Fourth-Quarter Revenue?

ServiceNow projected fourth-quarter 2026 revenue of between $4.25 billion and $4.26 billion.

The guidance was below the analyst consensus estimate of $4.36 billion.

At the lower end of the range, the company’s forecast was approximately $110 million below expectations. At the upper end, the difference was approximately $100 million.

The outlook indicated that ServiceNow expected fourth-quarter revenue to be lower than analysts had previously anticipated.

The forecast became a central consideration following the earnings announcement, alongside the company’s expectations for contracted revenue growth.

Why Is ServiceNow’s cRPO Growth Outlook Important?

ServiceNow projected fourth-quarter growth of approximately 18% in current remaining performance obligations, commonly referred to as cRPO.

This measure represents contracted revenue that the company expects to recognise over the following 12 months.

The projected growth rate indicated a slowdown in the pace of expansion of ServiceNow’s near-term contracted revenue obligations.

Investors and analysts monitor cRPO because it provides information about customer commitments and the potential conversion of existing contracts into future revenue.

However, cRPO is not the same as revenue already recognised, and actual revenue recognition depends on the timing and terms of customer agreements.

The approximately 18% growth forecast was therefore an additional factor in the market’s assessment of ServiceNow’s fourth-quarter outlook.

How Is ServiceNow Changing Its Revenue Classification?

ServiceNow disclosed an accounting change involving the classification of certain revenue associated with artificial intelligence deployments.

The company is reclassifying a portion of revenue previously recorded under subscriptions into professional services.

Management linked the change to efforts to accelerate AI implementation for large enterprise customers.

The adjustment changes how certain revenue is presented across the company’s reporting categories.

It may also affect comparisons between subscription and professional services revenue in future reporting periods.

The announcement added another consideration for investors evaluating ServiceNow’s revenue outlook and the composition of its business.

What Is ServiceNow’s Updated AI Contract Value Target?

ServiceNow raised its full-year artificial intelligence annual contract value target to $1.7 billion.

Annual contract value measures the annualised value of relevant customer contracts and provides information about the scale of contracted business.

The revised target reflected management’s expectations for ServiceNow’s AI-related commercial activity.

The company continues to expand artificial intelligence capabilities across its enterprise software products and services.

However, annual contract value is distinct from recognised revenue and does not directly indicate the amount of revenue or profit generated during a particular quarter.

The increase in the target was one of the positive operating developments reported alongside the company’s earnings and revenue guidance.

How Did ServiceNow’s Adjusted Operating Margin Perform?

ServiceNow reported a non-GAAP operating margin of 32.5% during the third quarter.

The figure exceeded the company’s guidance by 150 basis points, equivalent to 1.5 percentage points.

This result contrasted with the decline in GAAP operating margin to approximately 9.5%.

The difference reflects the distinct accounting treatments used in GAAP and non-GAAP financial measures.

Non-GAAP results exclude certain expenses according to the company’s adjusted reporting methodology, while GAAP figures include costs recognised under applicable accounting standards.

Both measures provided information about ServiceNow’s operating performance, although they presented different assessments of profitability.

What Did ServiceNow Announce About Its Partnership With OpenAI?

ServiceNow announced an expanded partnership with OpenAI focused on security and risk management solutions.

The collaboration is intended to support the development and deployment of artificial intelligence capabilities within enterprise workflows.

Security and risk management are among the areas in which ServiceNow provides software products to corporate customers.

The partnership announcement formed part of the company’s broader AI strategy, alongside its increased annual contract value target.

The supplied announcement did not specify additional revenue or earnings contributions associated with the expanded agreement.

How Were Broader Technology Markets Performing?

ServiceNow’s premarket decline occurred during a period of weakness in major US equity indices.

The Nasdaq declined 1.1%, while the S&P 500 fell 0.2% during the reported trading period.

Technology companies with relatively high earnings valuation multiples were also facing scrutiny as investors assessed corporate results and future growth expectations.

ServiceNow had declined approximately 3% during Wednesday’s regular trading session before releasing its quarterly results.

The subsequent after-hours decrease of more than 17% was followed by an 18.7% premarket decline on Thursday.

The company’s earnings announcement and fourth-quarter guidance were the principal company-specific developments accompanying the movement.

What Could Influence ServiceNow Shares Next?

ServiceNow’s fourth-quarter results will provide further information about whether the company achieves its projected revenue range of $4.25 billion to $4.26 billion.

Investors may also monitor cRPO growth to assess the pace of contracted revenue expansion.

Additional areas of attention include acquisition-related costs, GAAP and non-GAAP operating margins, and the effects of the revenue reclassification between subscription and professional services.

Progress toward the company’s $1.7 billion annual AI contract value target and developments associated with its expanded OpenAI partnership will provide further information about its artificial intelligence business.

The latest earnings report presented increased AI contract value expectations and a non-GAAP operating margin above guidance, alongside adjusted earnings below consensus, lower-than-expected fourth-quarter revenue guidance and reduced GAAP operating profitability.

More About ServiceNow

ServiceNow is a US enterprise software company that provides cloud-based platforms for digital workflows, IT service management, customer service, security operations and business process automation.

Its products are used by organisations to manage technology services, automate business processes and integrate artificial intelligence capabilities into enterprise operations.

The company’s financial performance is influenced by subscription revenue, customer contracts, operating expenses, acquisitions and demand for enterprise software and AI services.

ServiceNow stock price