ServiceNow Inc (NYSE:NOW) experienced a decline in its stock price on Tuesday, with shares slipping as market participants await the firm’s upcoming fourth-quarter earnings announcement. The anticipation surrounding the results has led to increased focus on company projections and market expectations.
According to estimates from Benzinga Pro, ServiceNow’s earnings per share (EPS) for the fourth quarter are expected to reach 72 cents. This forecast indicates a notable reduction when compared with the previous quarter’s performance, wherein ServiceNow reported Generally Accepted Accounting Principles (GAAP) earnings of $2.40 on a diluted share basis. The divergence highlights market uncertainties heading into the earnings release.
Despite the stock downturn, ServiceNow enters this reporting period buoyed by robust momentum stemming from an impressive third-quarter performance. The company outperformed guidance across all primary growth and profitability indicators, reinforcing investor confidence in its operational execution.
The third quarter saw substantial expansion in subscription revenue, which climbed to $3.3 billion, reflecting a 21.5% increase year-over-year. Total revenue closely mirrored this growth trajectory, attaining $3.41 billion, an increase of 22% relative to the same period in the prior year. These figures suggest strong demand for ServiceNow’s offerings and effective management strategies facilitating organic growth.
Complementing revenue strength, the firm reported meaningful gains in remaining performance obligations (RPO), a crucial forward-looking metric. Current RPO rose to $11.35 billion, while total RPO achieved $24.3 billion, both metrics increasing by more than 20% from the previous year. This trend demonstrates sustained contractual commitments and a healthy pipeline supporting future revenue visibility.
Leveraging these encouraging third-quarter outcomes, ServiceNow updated its full-year 2025 outlook by revising upward its targets for subscription revenue, operating margins, and free cash flow. The company’s expansion plans and financial objectives reflect confidence in its strategic direction.
Looking ahead to the fourth quarter, projected growth for current RPO is estimated at 23% on a GAAP basis and 19% when adjusted for constant currency effects. Operating margin is forecasted at approximately 30%, maintaining strong profitability standards. For the entirety of 2025, expected subscription revenue falls within a narrow range from $12.84 billion to $12.85 billion, representing 20.5% growth on a GAAP basis and 20% growth measured in constant currency.
ServiceNow also projects a subscription gross margin of 83.5%, indicating operational efficiency in generating revenue from its software services. The operating margin expectation for the year stands at 31%, with an anticipated free cash flow margin close to 34%, underscoring the company’s capacity to translate earnings into cash generation effectively.
CEO Bill McDermott expressed positive sentiments regarding the company’s third-quarter results, highlighting the performance as a definitive indicator of ServiceNow’s evolution toward becoming a leading artificial intelligence (AI) platform for enterprise transformation. McDermott emphasized that numerous companies across various industries are prioritizing AI adoption, positioning ServiceNow favorably within this trend.
To provide transparency and discuss the forthcoming quarterly results in detail, ServiceNow’s management is scheduled to conduct a conference call at 5:00 p.m. Eastern Time on Wednesday, affording investors and analysts a forum for questions and insights.
At the time of Tuesday’s market close, ServiceNow shares traded at $131.64, reflecting a decline of 3.46%. The stock movement highlights volatility amid mixed signals—strong operational performance contrasted with cautious investor sentiment awaiting the latest earnings disclosure.