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Earnings analysis · 10-Q

NOW earnings analysis

Filed October 28, 2026 · Our reading of the company's report

The latest report

ServiceNow delivered strong Q3 growth, with $4.106 billion of revenue and $1.00 of non-GAAP diluted EPS beating consensus, while subscription revenue, free cash flow margin, and AI ACV targets were raised. However, GAAP…

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ServiceNow delivered strong Q3 growth, with $4.106 billion of revenue and $1.00 of non-GAAP diluted EPS beating consensus, while subscription revenue, free cash flow margin, and AI ACV targets were raised. However, GAAP gross margin fell to 70.5% and operating margin was 9.5%, both pressured by acquisition-related and severance charges. The company also added $4.0 billion of senior notes, although its $3.0 billion revolver was undrawn at quarter-end. Overall, growth and outlook improved, but margin compression and higher leverage temper the outlook.

Read the original on SEC.gov

Gross and operating margin

How much of each revenue dollar the business keeps.

79% Gross margin Operating margin Oct 2023 Oct 2026

One point per quarterly or annual filing. Both margins are shares of that report's revenue.

From revenue to operating profit

Where each $100 of revenue went in this report.

Of every $100 of revenue Cost of sales $29 Operating expenses $61 Left as operating profit $10

Cost of sales, operating expenses, and what remained. Figures are rounded to whole dollars.

How we read each report

Our analysis across the last few reports.

Read as bullish Read as bearish Oct 2023 Oct 2026

Our model's reading of each filing, not the share price or the market's reaction. Annual and quarterly reports each occupy one position.

Reported figures

Earnings per share
$1.0

What stood out

  • Revenue growth remained strong

    Revenue was $4.106 billion, up approximately 2.9% from $3.99 billion in Q2 2026 and 20.4% from $3.41 billion in Q3 2025. Revenue exceeded the $4.094 billion consensus estimate.

  • EPS beat estimates

    Non-GAAP diluted EPS was $1.00 versus $0.29 in Q2 2026 and $0.48 in Q3 2025, and exceeded the $0.93 consensus estimate.

  • Subscription outlook was raised

    Management raised full-year 2026 subscription revenue guidance to $15.780-$15.790 billion and Q4 subscription revenue guidance to $4.245-$4.255 billion.

  • AI and cash flow targets increased

    Free cash flow margin guidance increased by 100 basis points to 36%, while the 2026 AI annual contract value target increased to $1.7 billion from $1.0 billion at the start of the year.

  • Operating margin recovered sequentially

    The company reported GAAP gross margin of 70.5%, down from 70.7% in Q2 2026 and 77.3% in Q3 2025, while GAAP operating margin improved from 4.1% in Q2 but remained below 16.8% a year earlier.

  • Revolver remained undrawn

    As of September 30, 2026, no amounts were outstanding under the new $3.0 billion unsecured revolving credit facility, providing additional liquidity capacity.

What to watch

  • GAAP margins remain pressured

    GAAP gross margin was 70.5%, down 680 basis points from 77.3% in Q3 2025, while GAAP operating margin was 9.5%, down 730 basis points from 16.8% a year earlier. Acquisition-related and severance charges contributed to margin pressure.

  • Debt increased materially

    The company issued $4.0 billion of fixed-rate senior unsecured notes in May 2026, receiving $3.9 billion net of a $57 million discount and issuance costs. The added debt increases fixed obligations even though the notes have no interest-rate sensitivity in the income statement.

  • Variable-rate liquidity exposure

    The $3.0 billion revolving credit facility carries variable-rate borrowings with a spread of 0.60% to 1.00% over an adjusted benchmark rate, exposing the company to higher borrowing costs if rates rise. No amounts were outstanding as of September 30, 2026.

  • No formal risk-factor update

    The filing states there were no material changes to risk factors since the December 31, 2025 Form 10-K; however, the quarter included new $4.0 billion senior notes and a $3.0 billion revolving facility that alter the company's financing profile.

  • Repurchase authorization remains large

    The company did not repurchase shares during Q3 2026, and approximately $4.2 billion remained available under the repurchase authorization as of September 30, 2026, leaving potential future cash demands.

Management's outlook

Full-year 2026 subscription revenue guidance was raised to $15.780-$15.790 billion, and free cash flow margin guidance was raised by 100 basis points to 36%. Q4 subscription revenue guidance is $4.245-$4.255 billion. The 2026 AI annual contract value target was raised to $1.7 billion from $1.0 billion at the start of the year.

Earlier filings 4

10-Q · July 22, 2026

ServiceNow delivered Q2 revenue of $3.987 billion, up 24% year over year and about 6% sequentially, while non-GAAP EPS of $0.90 exceeded the $0.76 consensus estimate. Demand indicators remained robust, with $29.0…

10-Q · April 22, 2026

ServiceNow reported quarterly revenue of $3,770 million, up 22% year-over-year, driven by subscription growth; non-GAAP free cash flow was $1,665 million (up 13%). Gross margin and professional services gross loss…

10-Q · April 23, 2025

ServiceNow reported solid Q1 results with revenues of $3,088 million, up 18.6% year-over-year (Q1 2024: $2,603 million). Gross margin was 78.9% while operating margin expanded to 14.6%; diluted EPS was $2.20 and…

10-K · January 30, 2025

ServiceNow reported strong full-year 2024 results driven by subscription growth and expanding RPO, with total revenues of $10.984 billion, GAAP diluted EPS of $6.84 and free cash flow of $3.455 billion. RPO increased to…

This is our reading of a public filing, not the filing itself. Analysis can contain errors; check the source document for full context.