ServiceNow Earnings Beat Estimates, Stock Slides

ServiceNow reported earnings on Jan. 28, 2026, that exceeded analyst forecasts, driven by AI-related demand. The company raised its full-year outlook and authorized a $5 billion share-repurchase program. Despite these positives, shares fell after the report amid broader weakness in software stocks.

Fourth-Quarter Results and Margins

ServiceNow’s subscription revenue for the fourth quarter of 2025 reached $3.466 billion, up 21% year-over-year and 19.5% on a constant-currency basis. Total revenue was $3.57 billion, surpassing the $3.53 billion estimate, while adjusted non-GAAP earnings per share came in at $0.92 versus $0.89 expected.

The non-GAAP operating margin expanded 150 basis points to 31%, and the company reported a free-cash-flow margin of 57% for the quarter. For the full year, subscription revenue rose 21% to $12.883 billion. Total remaining performance obligations (RPO) ended at $28.2 billion, with current RPO up 21% on a constant-currency basis to $12.85 billion, about 200 basis points above prior guidance.

Guidance, Capital Returns and AI Momentum

ServiceNow set its full-year 2026 subscription revenue guidance between $15.53 billion and $15.57 billion, implying growth of roughly 20.5% to 21% year-over-year and 19.5% to 20% on a constant-currency basis. This range includes about one percentage point from Moveworks. The company expects a non-GAAP operating margin of 32%, a subscription gross margin near 82%, and a free-cash-flow margin around 36%.

For the first quarter of 2026, subscription revenue guidance is $3.65 billion to $3.655 billion, reflecting about 21.5% growth year-over-year and 18.5% to 19% on a constant-currency basis. Management noted a 1.5-point headwind from customers shifting from on-premises to hosted deployments. The non-GAAP operating margin for Q1 is forecast near 31.5%, with current RPO growth of about 20% on a constant-currency basis.

The board approved an additional $5 billion share-repurchase program. ServiceNow entered 2026 with more than $10 billion in cash and investments and generated $4.6 billion in free cash flow for 2025, a 34% increase year-over-year.

AI products were central to the quarter’s growth. Now Assist generated over $600 million in net-new annual contract value (ACV) in Q4, doubling the prior year, and is on track to exceed $1 billion in net-new ACV in 2026. The company closed 244 net-new ACV deals above $1 million in the quarter, including nine new logos. Renewal rates reached 98% for 2025. ServiceNow had 603 customers with ACV above $5 million, up from 420 in Q4 2023, with an average ACV of $14.7 million.

ServiceNow expects to close its acquisition of Armis in early the second half of 2026. The deal should add about one percentage point to FY2026 subscription revenue while creating up to a 50-basis-point operating-margin headwind, which the company plans to absorb in 2027. Moveworks contributed minimally in Q4 but is projected to add about one point to FY2026 subscription revenue and RPO.

Shares declined in after-hours trading following the earnings release, reflecting broader pressure on software-sector stocks.