Revenue beat expectations and guidance was raised, yet the stock fell more than 25% in a single day. This earnings report wasn’t really about the current quarter. 📉
ServiceNow ($NOW ), Q3 2026: Revenue was $4.106 billion, up 20.5% year over year and slightly above market expectations of around $4.09 billion. Adjusted earnings per share were $1.00, below expectations of $1.02. Subscription revenue was $3.988 billion, up 21% year over year.
What really crushed the stock was the order guidance for next quarter: current remaining performance obligations (cRPO)—revenue expected to be recognized over the next 12 months—stood at $13.65 billion this quarter, up 20.5% year over year. But the company guided for cRPO growth of just 18.5% in Q4, below market expectations of 19.8% and this quarter’s 20.5%. Meanwhile, total remaining performance obligations reached $29.7 billion, up 22% year over year; the 2026 target for annual AI contract value was raised to $1.7 billion; and the full-year subscription revenue outlook and free cash flow margin forecast were also raised.
Management attributed the 2-cent EPS shortfall to lower interest income and higher debt costs following the Armis acquisition. On Thursday, the stock plunged more than 25% in a single day, its worst daily performance in over 14 years. Its gains for the year were wiped out, leaving it down about 24% year to date.
My take: This wasn’t a bad earnings report; the market simply changed the test. Current-quarter revenue, total orders, and AI contract value are all rising, but the stock is focused on the pace of order growth next quarter. The cRPO growth outlook slipped from 20.5% to 18.5%, signaling to the market that next year’s revenue visibility is fading—and that’s what software stocks fear most right now. Consider the two possible scenarios separately: if Q4 cRPO holds at 18.5% and renewals and AI contracts don’t deteriorate further, this looks more like an emotional overreaction in the market’s pricing. If cRPO keeps declining for two consecutive quarters, then it’s time to recalculate based on a lower growth trajectory rather than drawing conclusions from a single quarter’s numbers. When following software stocks during earnings season, don’t just focus on whether revenue beat expectations—first look at which way the order growth trend is turning.
Data as of: 2026-10-30 01:30 UTC
For informational purposes only; not investment advice.
ServiceNow ($NOW ), Q3 2026: Revenue was $4.106 billion, up 20.5% year over year and slightly above market expectations of around $4.09 billion. Adjusted earnings per share were $1.00, below expectations of $1.02. Subscription revenue was $3.988 billion, up 21% year over year.
What really crushed the stock was the order guidance for next quarter: current remaining performance obligations (cRPO)—revenue expected to be recognized over the next 12 months—stood at $13.65 billion this quarter, up 20.5% year over year. But the company guided for cRPO growth of just 18.5% in Q4, below market expectations of 19.8% and this quarter’s 20.5%. Meanwhile, total remaining performance obligations reached $29.7 billion, up 22% year over year; the 2026 target for annual AI contract value was raised to $1.7 billion; and the full-year subscription revenue outlook and free cash flow margin forecast were also raised.
Management attributed the 2-cent EPS shortfall to lower interest income and higher debt costs following the Armis acquisition. On Thursday, the stock plunged more than 25% in a single day, its worst daily performance in over 14 years. Its gains for the year were wiped out, leaving it down about 24% year to date.
My take: This wasn’t a bad earnings report; the market simply changed the test. Current-quarter revenue, total orders, and AI contract value are all rising, but the stock is focused on the pace of order growth next quarter. The cRPO growth outlook slipped from 20.5% to 18.5%, signaling to the market that next year’s revenue visibility is fading—and that’s what software stocks fear most right now. Consider the two possible scenarios separately: if Q4 cRPO holds at 18.5% and renewals and AI contracts don’t deteriorate further, this looks more like an emotional overreaction in the market’s pricing. If cRPO keeps declining for two consecutive quarters, then it’s time to recalculate based on a lower growth trajectory rather than drawing conclusions from a single quarter’s numbers. When following software stocks during earnings season, don’t just focus on whether revenue beat expectations—first look at which way the order growth trend is turning.
Data as of: 2026-10-30 01:30 UTC
For informational purposes only; not investment advice.
