ServiceNow (NOW) shares tumbled nearly 19% in premarket trading on Thursday, falling to $121.70, after the software company reported third-quarter adjusted earnings of $1.00 per share, missing analysts' estimate of $1.02, even as revenue came in at $4.11 billion versus the $4.10 billion consensus. The stock’s drop erased much of its recent rally from April’s $81 level to a high around $160.
Subscription revenue rose 21% year over year to $3.99 billion, while remaining performance obligations increased 22% to $29.7 billion. The company also raised its 2026 AI annual contract value target to $1.7 billion, up from $1 billion at the start of the year, marking the second increase of 2026. Fourth-quarter subscription revenue is guided to $4.245 billion to $4.255 billion, and full-year subscription revenue is expected between $15.78 billion and $15.79 billion. Free cash flow margin guidance was lifted 100 basis points to 36%.
CEO Bill McDermott attributed the $0.02 earnings miss to interest expenses tied to acquisitions completed in April. Interest expense jumped to $81 million from $6 million a year earlier. GAAP net income fell to $277 million, or $0.27 per share, from $502 million, or $0.48 per share, in the prior-year period. Non-GAAP operating margin was 32.5%, down from 33.5%, while free cash flow rose to $822 million from $592 million.
ServiceNow also announced an expanded partnership with OpenAI, a new collaboration with NVIDIA on governance and enforcement, and the launch of the Control Tower Alliance alongside Anthropic, Amazon Web Services, Cisco, and others. Despite the sell-off, some analysts argue the reaction may be overdone, noting the company’s forward price-to-earnings ratio has fallen to 38, below its five-year average of 56. From a crypto market perspective, there is no direct token impact, though the AI partnership news may be marginally relevant for AI-linked digital assets.
