ServiceNow (NOW) Shares Fall 6.4% Following Last Earnings Release: Is a Recovery Possible?

ServiceNow (NOW) Stock Update: Recent Performance and Earnings Overview

Over the past month, ServiceNow (NOW) shares have declined by approximately 6.4%, trailing behind the broader S&P 500 index.

As the next earnings announcement approaches, investors are questioning whether this downward momentum will persist or if a turnaround is on the horizon. To better understand the current landscape, let's review the company's most recent financial results and the key factors influencing its performance.

Fourth Quarter 2025: Strong Earnings and Revenue Growth

In the fourth quarter of 2025, ServiceNow posted adjusted earnings of $0.92 per share, exceeding the Zacks Consensus Estimate by 5.75% and marking a 26% increase year over year.

Total revenue reached $3.57 billion, surpassing expectations by 1.25% and representing a 20.7% rise compared to the previous year. When adjusted for constant currency, revenue climbed 19.5% to $3.51 billion.

Detailed Revenue Breakdown

• Subscription Revenue: Up 20.9% year over year to $3.47 billion (reported), or 19.5% higher at $3.41 billion (constant currency).
• Professional Services & Other Revenue: Increased by 12.1% to $102 million (reported), or 11% to $101 million (constant currency).
• Current Remaining Performance Obligations (cRPO): Ended the quarter at $12.85 billion, a 25% year-over-year increase (reported), or 21% higher (constant currency).
• Total Remaining Performance Obligations: Rose 22.5% year over year (constant currency) to $28.2 billion.

Customer Growth and Product Momentum

ServiceNow secured 244 new contracts exceeding $1 million in annual contract value (ACV) during the fourth quarter, reflecting nearly 40% growth from the prior year. The company finished the quarter with 603 customers generating over $5 million in ACV, up about 20% year over year.

Key AI-driven offerings such as Now Assist, Workflow Data Fabric, Raptor, and CPQ fueled these results. Notably, RaptorDB Pro achieved more than triple the net new ACV compared to last year, including 13 deals over $1 million. Workflow Data Fabric featured in 16 of the top 20 deals for the quarter, with increasing adoption rates throughout 2025.

• Workflows and transactions both grew by over 33%, with workflow value rising from $60 billion to $80 billion and transaction volume from $4.8 trillion to $6.4 trillion.
• There were 7 deals above $10 million in net new ACV, and CRM-related ACV growth reached a record high for the quarter.
• Monthly active users on ServiceNow’s AI platform increased by 25%.
• Now Assist’s net new ACV more than doubled year over year, surpassing $600 million, with 35 deals over $1 million.
• AI Control Tower deal volume nearly tripled sequentially.

Operating Performance

• Non-GAAP Gross Margin: 80.3%, down 160 basis points from the previous year.
• Subscription Gross Margin: 82.7%, also down 160 basis points year over year.
• Professional Services: Reported a $2 million gross loss, compared to a $7 million profit a year ago.
• Operating Expenses: Decreased to 64.2% of revenue, down 180 basis points year over year.
• Non-GAAP Operating Margin: Improved by 140 basis points to 30.9%.

Financial Position and Shareholder Returns

• As of December 31, 2025, ServiceNow held $6.28 billion in cash, cash equivalents, and marketable securities, up from $5.41 billion at the end of September.
• Operating cash flow for the quarter was $2.24 billion, a significant increase from $813 million in the previous quarter.
• Free cash flow reached $2.03 billion, up from $592 million, with a margin of 57% compared to 47.5% a year earlier.
• The company repurchased 3.6 million shares in the quarter and announced a new $5 billion buyback authorization, including plans for a $2 billion accelerated repurchase program.

2026 Guidance: Positive Outlook

• ServiceNow projects 2026 subscription revenue between $15.53 billion and $15.57 billion, indicating growth of 20.5% to 21% (GAAP) and 19.5% to 20% (constant currency), with a 1% contribution from Moveworks.
• Non-GAAP subscription gross margin is expected at 82%, and non-GAAP operating margin at 32%.
• Free cash flow margin is forecasted at 36%, up 100 basis points year over year.
• For Q1 2026, subscription revenue is anticipated between $3.65 billion and $3.67 billion, representing 21.5% year-over-year growth (GAAP) and 18.5% to 19% (constant currency), factoring in a 150 basis point headwind from a shift toward hosted revenue models and strong uptake of hyperscaler solutions. Moveworks is expected to contribute 1% to revenue.
• Non-GAAP operating margin for the quarter is projected at 31.5%, with cRPO growth of 22.5% (GAAP) and 20% (constant currency).

Estimate Revisions and Analyst Sentiment

Over the last month, analyst estimates for ServiceNow have generally moved higher, resulting in a 5.32% upward revision in the consensus forecast.

VGM Scores Overview

• Growth Score: A (strong performance)
• Momentum Score: B (slightly behind top performers)
• Value Score: D (in the lower 40% for value strategies)
• Overall VGM Score: B (a solid choice for diversified investors)

Future Prospects

With estimates trending upward and positive revisions, ServiceNow appears well-positioned for steady performance. The stock currently holds a Zacks Rank #3 (Hold), suggesting expectations for returns in line with the market over the coming months.

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