ServiceNow Raises Free Cash Flow Target After AI ACV Lift

The Tip Desk · October 30, 2026 · 3 min read

Subscription revenue reached $3,988 million in the third quarter as the company lifted its 2026 free cash flow margin target to 36%.

ServiceNow (NOW), the Super Intelligence Control Tower for business reinvention, reported subscription revenues of $3,988 million in the third quarter ended September 30, 2026, up 21% from a year earlier and 20.5% in constant currency.

That year-over-year pace slowed from 24.5% (23% in constant currency) in the second quarter, after having accelerated from 22% (19% in constant currency) in the first quarter. Total revenues were $4,106 million, up 20.5% year over year and 20% in constant currency.

The company said it beat the high end of its guidance across all third-quarter topline growth and profitability metrics and raised its full-year free cash flow margin outlook. Chairman and CEO Bill McDermott called the quarter “the inflection point for ServiceNow as the Super Intelligence Control Tower.”

GAAP net income was $277 million, or $0.27 a share. Non-GAAP net income was $1,039 million, or $1.00 a share. GAAP income from operations was $385 million, a 9.5% margin; non-GAAP income from operations was $1,338 million, a 32.5% margin. Subscription gross profit was $2,934 million, a 73.5% margin on a GAAP basis. Free cash flow was $822 million.

Current remaining performance obligations were $13.65 billion as of September 30, up 20.5% year over year and 21% in constant currency. Remaining performance obligations were $29.7 billion, up 22% year over year and 22.5% in constant currency. cRPO growth had been 21% (21.5% constant currency) in the second quarter. RPO growth had been 21% (22% constant currency) in the second quarter.

The company had 19 transactions over $5 million in net new annual contract value in the third quarter, representing over 135% year-over-year growth, and ended the period with 680 customers with more than $5 million in ACV, up from 658 in the second quarter. President and CFO Gina Mastantuono said AI net new ACV exceeded expectations, enabling the company to raise its year-end AI ACV target for the second time this year, from $1 billion at the start of the year to $1.7 billion. AI had crossed $1 billion in ACV in the second quarter.

Mastantuono said year-to-date consumption of agentic AI in production was up more than 13 times year over year, and that the company is capturing that opportunity with a capital-efficient model, reducing capex and raising its full-year free cash flow margin target by 100 basis points to 36%. Full-year 2026 GAAP subscription revenue guidance is $15,780 million to $15,790 million, with 22.5% year-over-year growth and 21% in constant currency. Non-GAAP subscription gross profit margin is guided at 81%, income from operations at 31.5%, and free cash flow at 36%.

For the fourth quarter, GAAP subscription revenue guidance is $4,245 million to $4,255 million, with 22.5% to 23% year-over-year growth and 21.5% in constant currency. cRPO growth is guided at 18.5%. Non-GAAP income from operations margin is guided at 32%.

On the day of the results, ServiceNow announced an expanded partnership with OpenAI, including a new ServiceNow plugin for ChatGPT enabled by Action Fabric, and said it aims to develop Security and Risk solutions powered by OpenAI cyber models. It also announced the Control Tower Alliance, with founding members including Anthropic, Amazon Web Services, Cisco, HiddenLayer, Kong, NVIDIA, Okta, OpenAI, Stripe, WitnessAI, and Zenity.