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The Zacks Consensus Estimate for third-quarter revenues is currently pegged at $4.09 billion, indicating 20% growth from the figure reported in the year-ago quarter.
The consensus mark for earnings is pegged at $1.02 per share, unchanged over the past 30 days and indicating growth of 6.3% from the year-ago quarter.
Consensus Earnings Trend
Image Source: Zacks Investment Research
ServiceNow’s earnings beat the Zacks Consensus Estimate in all the trailing four quarters, the average surprise being 6.75%.
Let’s see how things are shaping up prior to this announcement.
NOW’s Q3 to Ride on Strong Portfolio Amid Stiff Competition
ServiceNow’s third-quarter 2026 results are expected to have benefited from accelerating enterprise adoption of agentic AI solutions, particularly Now Assist, AI Control Tower and Autonomous Workforce. The company’s AI annual contract value (ACV) exceeded $1 billion in the second quarter, with net new AI ACV growing more than 40% sequentially. Growing AI deployments, combined with stronger customer consumption and increased adoption of higher-value AI packages, are expected to have supported subscription revenues.
NOW’s new AI-native packaging strategy is expected to have boosted third-quarter performance by making AI capabilities accessible to a wider customer base. The company’s Foundation, Advanced and Prime offerings allow enterprises to adopt AI based on their requirements. Increasing monetization opportunity is expected to have supported deal values and subscription growth. Moreover, sustained demand for IT Service Management (ITSM) and IT Operations Management (ITOM) solutions has been a key catalyst. In the second quarter of 2026, ITSM featured in 15 of the company's 20 largest deals, while ITOM was included in 18.
The company’s expanding cybersecurity portfolio is expected to have been a significant contributor to third-quarter top-line growth. The integration of Armis and Veza strengthens NOW’s capabilities in asset intelligence, identity security, vulnerability management and automated threat response. These solutions complement AI Control Tower and the existing ITSM and ITOM portfolios, creating opportunities for cross-selling. The combination is expected to have supported subscription revenues, larger enterprise contracts and greater adoption of the company's core workflow solutions.
However, ServiceNow’s third-quarter subscription revenue growth is expected to have faced pressure from the timing of U.S. federal government contracts. Strong federal demand in the second quarter accelerated certain on-premises subscription revenues that would otherwise have been recognized in the third quarter. This pull-forward creates a difficult sequential comparison despite healthy underlying demand. NOW expects third-quarter subscription revenues of $3.975-$3.980 billion, indicating approximately 20% year-over-year growth in constant currency, compared with 23% growth in the second quarter.
The company’s third-quarter results are expected to have suffered from unfavorable forex and acquisition-related charges. Higher AI processing requirements and cloud delivery costs are likely to have increased subscription costs. Moreover, stiff competition from Salesforce (CRM - Free Report) , Microsoft (MSFT - Free Report) , Oracle (ORCL - Free Report) and other enterprise software vendors that are rapidly embedding generative AI into their platforms, requiring continued investment to sustain technological leadership, has been a headwind. This is expected to have kept margins under pressure in the to-be-reported quarter.
ServiceNow Shares Lag Sector, Overvalued
NOW shares have risen 3.8% year to date (YTD), underperforming the broader Zacks Computer & Technology sector’s return of 14.1%. Shares of Microsoft have returned 8.5% YTD while Oracle and Salesforce have dropped 35.3% and 6.1%, respectively, over the same time frame.
NOW Stock’s Price Performance
Image Source: Zacks Investment Research
ServiceNow’s Value Score of F suggests a stretched valuation at this moment.
In terms of the forward 12-month price/earnings (P/E), NOW is trading at 33.05X, higher than the broader sector’s 18.86X, Microsoft’s 25.18X, Oracle’s 13.66X and Salesforce’s 15.43X.
NOW Shares Overvalued
Image Source: Zacks Investment Research
Can ServiceNow’s AI Initiatives Help the Stock Recover?
NOW’s long-term prospects are expected to benefit from the increasing adoption of autonomous AI agents across enterprise workflows. The company’s AI-native subscription offerings and consumption-based AI Assist packages create opportunities for higher spending as customers automate more tasks. ServiceNow increased its 2026 AI ACV objective from $1 billion to $1.5 billion and expects AI to account for approximately 30% of ACV by 2030.
ServiceNow’s AI Control Tower is emerging as a strategic long-term growth driver as enterprises seek to manage rapidly expanding AI ecosystems. The solution enables organizations to discover, monitor, govern and secure AI agents, including those developed by third-party providers. Its ability to track AI spending, measure investment returns and enforce governance policies strengthens NOW’s positioning as an enterprise orchestration platform. Moreover, expanding security and risk portfolio with the acquisitions of Armis and Veza offers significant tailwinds for NOW.
However, ServiceNow faces increasing infrastructure costs as AI adoption and customer workloads expand. Sustained cost inflation could limit long-term gross margin expansion. Moreover, the enterprise software landscape is becoming increasingly competitive as hyperscalers and application vendors embed AI into their platforms. Microsoft, Salesforce, Oracle, Google Cloud and others continue investing heavily in agentic AI, workflow automation and enterprise productivity solutions. Sustaining product differentiation will require continued innovation, acquisitions and elevated spending from ServiceNow.
Conclusion
While ServiceNow continues to benefit from strong AI adoption and an expanding enterprise platform, near-term risks appear to outweigh the positives. Rising operating expenses, intensifying competition, longer enterprise spending cycles and a premium valuation could limit upside even if the company delivers another earnings beat.
ServiceNow currently carries a Zacks Rank #4 (Sell), which implies investors should avoid the stock ahead of the quarterly results announcement.
View the Zacks #1 Rank List
Image: Bigstock
ServiceNow Q3 Earnings Loom: Hold or Fold NOW Stock Ahead of Results?
Key Takeaways
ServiceNow (NOW - Free Report) is scheduled to release its third-quarter 2026 results on Oct. 28.
The Zacks Consensus Estimate for third-quarter revenues is currently pegged at $4.09 billion, indicating 20% growth from the figure reported in the year-ago quarter.
The consensus mark for earnings is pegged at $1.02 per share, unchanged over the past 30 days and indicating growth of 6.3% from the year-ago quarter.
Consensus Earnings Trend
Image Source: Zacks Investment Research
ServiceNow’s earnings beat the Zacks Consensus Estimate in all the trailing four quarters, the average surprise being 6.75%.
ServiceNow, Inc. Price and EPS Surprise
ServiceNow, Inc. price-eps-surprise | ServiceNow, Inc. Quote
Let’s see how things are shaping up prior to this announcement.
NOW’s Q3 to Ride on Strong Portfolio Amid Stiff Competition
ServiceNow’s third-quarter 2026 results are expected to have benefited from accelerating enterprise adoption of agentic AI solutions, particularly Now Assist, AI Control Tower and Autonomous Workforce. The company’s AI annual contract value (ACV) exceeded $1 billion in the second quarter, with net new AI ACV growing more than 40% sequentially. Growing AI deployments, combined with stronger customer consumption and increased adoption of higher-value AI packages, are expected to have supported subscription revenues.
NOW’s new AI-native packaging strategy is expected to have boosted third-quarter performance by making AI capabilities accessible to a wider customer base. The company’s Foundation, Advanced and Prime offerings allow enterprises to adopt AI based on their requirements. Increasing monetization opportunity is expected to have supported deal values and subscription growth. Moreover, sustained demand for IT Service Management (ITSM) and IT Operations Management (ITOM) solutions has been a key catalyst. In the second quarter of 2026, ITSM featured in 15 of the company's 20 largest deals, while ITOM was included in 18.
The company’s expanding cybersecurity portfolio is expected to have been a significant contributor to third-quarter top-line growth. The integration of Armis and Veza strengthens NOW’s capabilities in asset intelligence, identity security, vulnerability management and automated threat response. These solutions complement AI Control Tower and the existing ITSM and ITOM portfolios, creating opportunities for cross-selling. The combination is expected to have supported subscription revenues, larger enterprise contracts and greater adoption of the company's core workflow solutions.
However, ServiceNow’s third-quarter subscription revenue growth is expected to have faced pressure from the timing of U.S. federal government contracts. Strong federal demand in the second quarter accelerated certain on-premises subscription revenues that would otherwise have been recognized in the third quarter. This pull-forward creates a difficult sequential comparison despite healthy underlying demand. NOW expects third-quarter subscription revenues of $3.975-$3.980 billion, indicating approximately 20% year-over-year growth in constant currency, compared with 23% growth in the second quarter.
The company’s third-quarter results are expected to have suffered from unfavorable forex and acquisition-related charges. Higher AI processing requirements and cloud delivery costs are likely to have increased subscription costs. Moreover, stiff competition from Salesforce (CRM - Free Report) , Microsoft (MSFT - Free Report) , Oracle (ORCL - Free Report) and other enterprise software vendors that are rapidly embedding generative AI into their platforms, requiring continued investment to sustain technological leadership, has been a headwind. This is expected to have kept margins under pressure in the to-be-reported quarter.
ServiceNow Shares Lag Sector, Overvalued
NOW shares have risen 3.8% year to date (YTD), underperforming the broader Zacks Computer & Technology sector’s return of 14.1%. Shares of Microsoft have returned 8.5% YTD while Oracle and Salesforce have dropped 35.3% and 6.1%, respectively, over the same time frame.
NOW Stock’s Price Performance
Image Source: Zacks Investment Research
ServiceNow’s Value Score of F suggests a stretched valuation at this moment.
In terms of the forward 12-month price/earnings (P/E), NOW is trading at 33.05X, higher than the broader sector’s 18.86X, Microsoft’s 25.18X, Oracle’s 13.66X and Salesforce’s 15.43X.
NOW Shares Overvalued
Image Source: Zacks Investment Research
Can ServiceNow’s AI Initiatives Help the Stock Recover?
NOW’s long-term prospects are expected to benefit from the increasing adoption of autonomous AI agents across enterprise workflows. The company’s AI-native subscription offerings and consumption-based AI Assist packages create opportunities for higher spending as customers automate more tasks. ServiceNow increased its 2026 AI ACV objective from $1 billion to $1.5 billion and expects AI to account for approximately 30% of ACV by 2030.
ServiceNow’s AI Control Tower is emerging as a strategic long-term growth driver as enterprises seek to manage rapidly expanding AI ecosystems. The solution enables organizations to discover, monitor, govern and secure AI agents, including those developed by third-party providers. Its ability to track AI spending, measure investment returns and enforce governance policies strengthens NOW’s positioning as an enterprise orchestration platform. Moreover, expanding security and risk portfolio with the acquisitions of Armis and Veza offers significant tailwinds for NOW.
However, ServiceNow faces increasing infrastructure costs as AI adoption and customer workloads expand. Sustained cost inflation could limit long-term gross margin expansion. Moreover, the enterprise software landscape is becoming increasingly competitive as hyperscalers and application vendors embed AI into their platforms. Microsoft, Salesforce, Oracle, Google Cloud and others continue investing heavily in agentic AI, workflow automation and enterprise productivity solutions. Sustaining product differentiation will require continued innovation, acquisitions and elevated spending from ServiceNow.
Conclusion
While ServiceNow continues to benefit from strong AI adoption and an expanding enterprise platform, near-term risks appear to outweigh the positives. Rising operating expenses, intensifying competition, longer enterprise spending cycles and a premium valuation could limit upside even if the company delivers another earnings beat.
ServiceNow currently carries a Zacks Rank #4 (Sell), which implies investors should avoid the stock ahead of the quarterly results announcement.
You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.