ServiceNow Inc. beat its own forecasts for the third quarter and raised its revenue outlook for the year. By Thursday morning its shares were down 19% in premarket trading, on track for the largest one-day decline in the company’s history, according to MarketWatch.
The gap between the two explains more about enterprise software in 2026 than either number does on its own. ServiceNow reported total revenue of $4.106 billion for the quarter ended September 30, up 20.5% from a year earlier. Subscription revenue, the number investors watch, reached $3.988 billion, up 21%, or 20.5% in constant currency.
Current remaining performance obligations, contracted work to be billed over the next 12 months, came in at $13.65 billion, up 20.5%. Total remaining obligations reached $29.7 billion. Both figures came in ahead of guidance.
Profitability was less tidy. Net income was $277 million, below the year-earlier figure, as stock-based compensation and acquisition costs weighed on reported profit. On the company’s preferred non-GAAP basis, operating margin was 32.5%, and free cash flow margin was 20% for the quarter.
The selloff traced to guidance rather than results. ServiceNow told investors to expect fourth-quarter subscription revenue of about $4.25 billion, short of the $4.36 billion consensus that analysts had assembled. The company still raised its full-year subscription forecast to $15.785 billion at the midpoint, 21% growth in constant currency, and lifted its free cash flow margin target by a percentage point to 36%.
The number that management wants the market to price is smaller and faster-growing. ServiceNow raised its target for annual contract value from AI products to $1.7 billion by the end of 2026, up from $1.5 billion set earlier in the year and from $1 billion when the year began. Net new AI contract value rose 65% in the quarter.
Chief Financial Officer Gina Mastantuono said customers’ consumption of agentic AI in production had risen more than 13 times from a year earlier. She also pointed to a capital-light model, with capital spending coming down as the company leans on its own data centers and rented capacity rather than building.
The customer mix supports the claim at the top end. ServiceNow closed 19 deals worth more than $5 million in net new contract value, up more than 135% from a year earlier, and now counts 680 customers spending above $5 million a year, roughly 23% more than twelve months ago.
Hours before the earnings call, ServiceNow and OpenAI announced an expansion of the partnership they began in January. The centerpiece is a ServiceNow plugin for ChatGPT, available in OpenAI’s marketplace, that lets an employee investigate an incident, check the risk of a change and update a record without leaving the chat window.
The integration runs through ServiceNow’s Action Fabric, which applies the customer’s own business rules and permissions to each action. A company connects ChatGPT to its instance and chooses which capabilities to expose. In a demonstration the companies described, an on-call engineer reviews monitoring alerts and recent changes inside ChatGPT, then assigns the affected team.
Three more pieces are planned rather than shipped. A Codex integration inside ServiceNow’s AI Workflow Factory is slated for 2027. Security and risk products built on OpenAI’s cyber models are due in early access in January 2027, with general availability in the second quarter. A voice interface for the company’s control-tower product is expected in the first quarter of 2027.
The agreement also runs inward. ServiceNow plans to give all employees access to ChatGPT Work and Codex, not just engineers, while OpenAI said it uses ServiceNow workflows in its own operations. Neither company disclosed financial terms, revenue sharing or the length of the arrangement.
Wall Street read the two announcements together and marked software down. Salesforce and Adobe fell in sympathy, even though both have reported fast growth in AI-related bookings this year. What worries investors is pricing. Demand is arriving, but not in the shape of the per-seat licenses these companies built their margins on.
The bear case is easy to state. If ChatGPT becomes the screen where work begins, OpenAI owns the customer relationship, and ServiceNow becomes a system of record behind an interface it does not control. ServiceNow already routes workflows into Google’s Gemini Enterprise through a similar arrangement, and that alliance includes OpenAI’s rivals.
ServiceNow’s answer is that the work still has to run somewhere governed. Amit Zavery, the company’s president and chief product officer, has argued that the economics stay with ServiceNow because each request an employee makes consumes the company’s own metered units, whether or not the employee sees the ServiceNow interface.
That argument will be tested in the fourth quarter, when the guidance gap either closes or widens. Analysts will watch current remaining obligations for signs that large AI deals are converting into billed work, and the plugin’s usage for evidence that ChatGPT access brings new customers rather than shifting existing ones. The company has raised its AI target twice this year. The market has now priced in the possibility that it will miss the other number instead.
