ServiceNow's subscription revenue grows 21 percent in third quarter

What happened

ServiceNow reported on Wednesday 28 October that third-quarter subscription revenue grew 21 percent to $3,988 million, and it raised its subscription revenue outlook for 2026. ^[1]

Total revenue was $4,106 million, against $3,407 million a year earlier, the company reported. Current remaining performance obligations, contract revenue due within the next 12 months, were $13.65 billion, 20.5 percent higher. ^[1]

Income from operations was $385 million, down from $572 million, and net income was $277 million, down from $502 million. Interest expense was $81 million, against $6 million a year earlier. ^[1]

Why it matters

Revenue grew while operating income shrank, and the quarterly report filed the same evening says amortization of intangible assets in subscription costs was $119 million higher than a year earlier. The report ties that cost to acquired intangible assets; this year ServiceNow bought Veza for about $1.2 billion and Armis for about $7.6 billion. Long-term debt stood at $5,438 million on 30 September, against $1,491 million at the end of 2025. ^{[1, 2]}

What the company said drove it

Chief executive Bill McDermott called the quarter 'the inflection point for ServiceNow as the Super Intelligence Control Tower', its name for its AI governance product. Chief financial officer Gina Mastantuono said on the call that AI net new annual contract value grew 65 percent from a year earlier. ^{[1, 3, 5]}

The company raised its year-end target for AI annual contract value to $1.7 billion, from $1 billion at the start of the year. It signed 19 deals worth over $5 million in net new annual contract value, and ended the quarter with 680 customers above that mark, according to the release. ^{[1, 4]}

Mastantuono said U.S. federal deals over $1 million grew over 30 percent from a year earlier, and that the company expects federal net new annual contract value growth 'to accelerate further' in the fourth quarter. The quarterly report says the most federal 12-month agreements were signed in the September quarter, driven primarily by the timing of annual budget spending. ^{[2, 5]}

The outlook

For the fourth quarter, ServiceNow guided subscription revenue of $4,245 million to $4,255 million, growth of 22.5 to 23 percent. It guided growth of 18.5 percent in current remaining performance obligations, at constant currency, which strips out exchange rate moves. ^[1]

Mastantuono said that figure reflects more on-premises deals, which count in revenue but not in that measure. For 2026 the company now guides subscription revenue of $15,780 million to $15,790 million, against $15,760 million to $15,780 million in July, and a free cash flow margin of 36 percent, up from 35 percent. ^{[1, 5, 6]}

SiliconANGLE reported the fourth-quarter range as $4.25 billion to $4.26 billion in sales, while the company's release gives its range for subscription revenue, $4,245 million to $4,255 million. ^{[1, 4]}

What settles it next

Mastantuono is scheduled to speak at the Wells Fargo TMT Summit on Tuesday 8 December and the Barclays Global Technology Conference on Wednesday 9 December, the release says. The fourth quarter, which the guidance covers, closes on Thursday 31 December; its results date has not been announced. ^[1]

Who it reaches

ServiceNow (NOW) is direct: the figures and the outlook are its own filings. Hewlett Packard Enterprise (HPE) is adjacent: the release says HPE selected ServiceNow for customer support and field service in its Cloud and AI business. ^[1]