ServiceNow (NOW) Stock Drops Despite Earnings Beat and Full-Year Guidance Raised

TLDR

• ServiceNow beat Q2 2026 estimates with adjusted EPS of $0.90 vs. $0.86 forecast and revenue of $3.99B vs. $3.93B expected
• Subscription revenue rose 23% year over year in constant currency to $3.877B
• AI annual contract value surpassed $1B, ahead of the company’s own targets
• Full-year subscription revenue guidance raised to $15.755B–$15.770B
• Stock fell 6.47% to $95.46 in regular trading, then bounced 4.75% after hours to $99.99

ServiceNow beat Wall Street estimates on both the top and bottom line in Q2 2026, but the stock still ended the regular session sharply lower before recovering in after-hours trading.

SERVICENOW $NOW Q2’26 EARNINGS HIGHLIGHTS

🔹 Subscription: $3.88B; +24.5% YoY, +23% cc
🔹 Total Revenue: $3.99B (Est. $3.92B) 🟢; +24% YoY, +22.5% cc
🔹 Adj. EPS: $0.90 (Est. $0.86) 🟢
🔹 cRPO: $13.20B (Est. ~$13.03B) 🟢; +21% YoY, +21.5% cc

Q3 Guide:
🔹 Subscription:… pic.twitter.com/7sgK7CjWS0

— Wall St Engine (@wallstengine) July 22, 2026

The company reported adjusted EPS of $0.90, above the $0.86 consensus. Revenue came in at $3.99 billion, ahead of the $3.93 billion forecast. Subscription revenue reached $3.877 billion, up 23% year over year in constant currency.

The stock closed at $95.46, down 6.47% from the prior close of $102.06. After the results dropped, it climbed 4.75% in after-hours trading to $99.99 — but still sat roughly 2% below the previous session’s close.

ServiceNow, Inc., NOW

Non-GAAP operating margin came in at 29.5%, which was 300 basis points above the company’s own guidance. Free cash flow margin for the quarter was 16%.

Total remaining performance obligations hit $29 billion, up 22% in constant currency. Current RPO came in at $13.2 billion, up 21.5%.

AI Momentum Builds

AI ACV crossed $1 billion in the quarter, putting ServiceNow ahead of its pace toward a $1.5 billion target by end of 2026. Management also said the company is on track to have AI represent 30% of ACV by 2030.

New AI products include Level 1 ITSM AI specialists, which are already handling 80% to 85% of service requests without human involvement. The company’s AI-native SKUs carry a pricing uplift of 20% to 30%.

ServiceNow also highlighted its AI Control Tower product, which handles governance across AI agents, and pointed to deeper integrations with Microsoft, NVIDIA and Accenture.

CEO Bill McDermott said the company is “in the bullseye of AI, cybersecurity, workflow orchestration, integration, and automation.” CFO Gina Mastantuono said customers are paying for “resolutions,” not tokens.

Guidance Raised, But Cautiously

ServiceNow lifted its full-year 2026 subscription revenue guidance to $15.755B–$15.770B, implying 21% constant-currency growth. Full-year operating margin guidance stays at 31.5%, with free cash flow margin guided to 35%.

For Q3, the company guided subscription revenue of $3.975B–$3.980B, up 20% in constant currency, with operating margin of 31%.

Management flagged that some Q2 outperformance came from U.S. federal government deals that shifted revenue forward from Q3. Executives said this was not the whole story, pointing to net new ACV that came in well ahead of plan.

Gross margin pressure from hyperscaler partnerships and AI consumption remains a watch item. The stock’s P/E of 57 and PEG ratio of 4.34 leave limited room for any stumble.

Jefferies analyst Samad Samana raised his price target on NOW to $140 from $135 following the results, keeping a Buy rating. He noted healthy beats on constant currency cRPO, subscription revenue, and operating margin, and said the Q3 cRPO outlook reflects underlying business strength.

The 52-week range for NOW is $81.24 to $210.20.

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