ServiceNow (NOW) Has Fallen 6.4% Since Previous Earnings Release: Is a Recovery Possible?

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

Over the past month, ServiceNow's stock price has declined by approximately 6.4%, trailing behind the S&P 500 index. As the next earnings report approaches, investors are questioning whether this downward momentum will persist or if a rebound is on the horizon. To better understand the current situation, let's review the company's most recent earnings results and key growth drivers.

Fourth Quarter 2025: Earnings and Revenue Overview

In the fourth quarter of 2025, ServiceNow posted adjusted earnings of $0.92 per share, surpassing analyst expectations by 5.75% and marking a 26% increase from the previous year. Revenue reached $3.57 billion, exceeding consensus estimates by 1.25% and reflecting a 20.7% year-over-year gain. On a constant currency basis, revenue rose 19.5% to $3.51 billion.

Breakdown of Q4 Revenue

Subscription revenue climbed 20.9% year over year to $3.47 billion, or 19.5% higher at constant currency ($3.41 billion). Revenue from professional services and other sources grew 12.1% to $102 million, or 11% to $101 million on a constant currency basis. At the quarter's close, current remaining performance obligations (cRPO) stood at $12.85 billion, up 25% year over year (21% at constant currency). Total remaining performance obligations reached $28.2 billion, a 22.5% increase on a constant currency basis.

Customer Growth and Product Momentum

During Q4 2025, ServiceNow secured 244 deals each worth over $1 million in net new annual contract value (ACV), representing nearly 40% growth from the prior year. The company ended the quarter with 603 customers generating more than $5 million in ACV, up about 20% year over year.

ServiceNow's AI-driven solutions, including Now Assist, Workflow Data Fabric, Raptor, and CPQ, contributed significantly to these results. RaptorDB Pro saw its net new ACV more than triple year over year, with 13 deals exceeding $1 million. Workflow Data Fabric featured in 16 of the top 20 deals for the quarter, and both the number of workflows and transactions increased by over 33%, reaching $80 billion and $6.4 trillion, respectively.

The company also reported 7 deals above $10 million in NNACV, and CRM NNACV growth accelerated to a record high. Monthly active users of ServiceNow’s AI platform grew by 25%. Now Assist’s NNACV more than doubled year over year, surpassing $600 million in ACV, with 35 deals over $1 million. AI Control Tower deal volume nearly tripled compared to the previous quarter.

Operating Performance

ServiceNow’s non-GAAP gross margin for Q4 2025 was 80.3%, a decrease of 160 basis points from the prior year. Subscription gross margin was 82.7%, also down 160 basis points. Professional services and other segments reported a $2 million gross loss, compared to a $7 million profit a year earlier. Operating expenses as a percentage of revenue fell by 180 basis points to 64.2%. The non-GAAP operating margin improved by 140 basis points to 30.9%.

Financial Position and Cash Flow

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, compared to $813 million in the previous quarter. Free cash flow reached $2.03 billion, up from $592 million, with a free cash flow margin of 57% versus 47.5% a year earlier.

In Q4 2025, the company repurchased 3.6 million shares and announced a new $5 billion share buyback authorization, including plans for a $2 billion accelerated repurchase program.

2026 Outlook and Guidance

Looking ahead to 2026, ServiceNow anticipates subscription revenues between $15.53 billion and $15.57 billion, representing a 20.5% to 21% increase from 2025 on a GAAP basis (19.5% to 20% at constant currency). This forecast includes a 1% contribution from Moveworks. The company expects a non-GAAP subscription gross margin of 82%, a non-GAAP operating margin of 32%, and a free cash flow margin of 36%, up 100 basis points year over year.

For the first quarter of 2026, projected subscription revenues range from $3.65 billion to $3.67 billion, indicating 21.5% year-over-year growth on a GAAP basis and 18.5% to 19% at constant currency. This guidance factors in a 150 basis point headwind from a shift toward hosted revenues, driven by strong adoption of hyperscaler offerings, and includes a 1% revenue contribution from Moveworks. The non-GAAP operating margin is expected to be 31.5%, with cRPO growth of 22.5% on a GAAP basis and 20% at constant currency.

Recent Estimate Revisions

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

VGM Scorecard

ServiceNow currently holds an A rating for Growth and a B for Momentum, but scores a D for Value, placing it in the lower 40% for value-focused strategies. The overall VGM Score is B, making it a solid choice for investors not tied to a single investment style.

Investment Outlook

Analyst estimates for ServiceNow have been trending upward, and the scale of these revisions is encouraging. The stock carries a Zacks Rank #3 (Hold), suggesting that returns are expected to be in line with the market over the coming months.

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