This article first appeared on GuruFocus .
ServiceNow ( NYSE:NOW ) shares fell 19.90% in premarket after the company reported third-quarter non-GAAP EPS of $1.00, below the analysts' consensus of $1.02, as revenue of $4.11 billion edged past the $4.10 billion estimate.
Subscription revenue rose 21% to $3.99 billion, and current remaining performance obligations grew 21% to $13.65 billion. But ServiceNow guided fourth-quarter cRPO growth to 18.5% in constant currency, and non-GAAP subscription gross margin narrowed to 80% from 83%. GAAP operating margin fell to 9.5% from 17%, as amortization of acquired intangibles rose to $198 million from $33 million.
CFO Gina Mastantuono said early renewals pulled deals into the third quarter, accounting for about half of its cRPO beat, while a higher mix of on-premises public sector deals will weigh on fourth-quarter cRPO. cRPO is a very nuanced accounting metric, she said.
ServiceNow bought back no stock in the quarter, against $584 million a year earlier, and long-term debt rose to $5.44 billion from $1.49 billion at the end of 2025. Free cash flow rose to $822 million from $592 million, and the company raised its full-year free cash flow margin target to 36% from 35% on lower capital spending. It also raised its full-year subscription revenue outlook to $15.785 billion at the midpoint.
