ServiceNow guided fourth-quarter revenue to a range of $4.25B to $4.26B on Oct. 28, below the $4.36B analysts expected, while raising its 2026 artificial intelligence annual contract value target to $1.7B, up 70% from the start of the year and its second increase in 2026.
The quarter itself came in mixed. Revenue reached $4.11B against a $4.09B consensus, while adjusted earnings per share of $1.00 fell short of the $1.02 estimate, and subscription revenue, the bulk of the business, hit $3.99B for 21% growth from a year earlier.
The backlog keeps building even as guidance cools
Current remaining performance obligations, meaning contracted revenue due to be recognized over the next 12 months, landed at $13.65B, up 20.5%.
Total remaining performance obligations of $29.7B grew 22%, a sign that customers are signing longer and larger deals even as the near-term revenue outlook comes in light.
ServiceNow also raised its full-year subscription revenue outlook and lifted its full-year free cash flow margin target, which management tied to reduced capital spending.
Large deals did the heavy lifting. The company closed 19 transactions worth more than $5M in net new annual contract value during the quarter, growth of more than 135% from a year earlier, and finished with 680 customers spending above $5M a year.
The gap between a growing backlog and softer forward guidance is the tension to watch, since much of the AI growth the company highlights is measured in contract value that has yet to show up as recognized revenue.
ServiceNow Keeps Raising Its AI Target
2026 AI annual contract value target, start of year vs. after Q3 2026, $B
Bar chart. Billions (USD). Start of 2026: AI ACV target ($B) $1. After Q3 2026: AI ACV target ($B) $1.7.
OpenAI moves deeper into the platform
Alongside the results, ServiceNow expanded its partnership with OpenAI, starting with a plugin for ChatGPT that's available in the OpenAI marketplace now.
The plugin lets workers run ServiceNow workflows inside ChatGPT, with the company's existing business rules and permissions applied through its Action Fabric layer. An IT staffer can look up incidents and update a record without switching tools.
A joint security product combining OpenAI's cybersecurity models with ServiceNow's asset and identity data is expected in early access in January 2027, with general availability planned for the second quarter of 2027. A Codex integration in ServiceNow's AI Workflow Factory, aimed at helping developers build applications, is planned for 2027 as well.
The traffic runs both ways. ServiceNow plans to give all employees access to ChatGPT Work and Codex, while OpenAI is deploying ServiceNow workflows across its own operations.
OpenAI is also a founding member of the Control Tower Alliance, a new partner group ServiceNow launched for enterprise AI governance that includes Anthropic, Amazon Web Services, Cisco, Nvidia, and Okta.
Hewlett Packard Enterprise separately picked ServiceNow as the base for support services across its Cloud and AI business under a five-year agreement.
That leaves investors weighing an AI target raised twice in one year against a fourth quarter ServiceNow expects to land roughly $100M below what Wall Street had penciled in, with the next read on whether the contract backlog is turning into recognized revenue due when fourth-quarter results arrive.
