NOW Share Price Rally Fueled by Strong Earnings and AI-Powered Growth Trajectory

ServiceNow’s recent quarterly performance has revitalized investor sentiment after a brief pullback. The software company delivered impressive financial results that signal robust business momentum and a compelling growth outlook, positioning the stock for potential recovery and sustained expansion in the coming quarters.

Delivering Across All Metrics: Q4 Financial Performance Exceeds Expectations

ServiceNow reported fourth-quarter earnings that substantially exceeded market consensus. The company posted adjusted earnings of $0.92 per share, surpassing analyst expectations by 5.75%, while year-over-year earnings growth accelerated to 26%. Revenue totaled $3.57 billion, outperforming the consensus estimate by 1.25% and reflecting a 20.7% year-over-year increase.

On a constant currency basis, the revenue picture looks even more compelling, with top-line growth of 19.5% year-over-year reaching $3.51 billion. Subscription revenues, the company’s primary revenue engine, grew 20.9% year-over-year to $3.47 billion on a reported basis. Professional services and other revenues, though smaller at $102 million, still expanded 12.1% year-over-year, demonstrating healthy diversification in the company’s income streams.

A particularly notable metric came from remaining performance obligations, which grew 25% year-over-year on a reported basis to reach $12.85 billion at quarter-end. This metric serves as a leading indicator of future revenue potential and underscores strong customer commitment to the platform.

AI Products and Expanding Customer Base Propel Revenue Acceleration

The expansion of NOW’s enterprise customer footprint emerged as a primary driver of revenue momentum. The company completed 244 enterprise transactions exceeding $1 million in net new annual contract value during Q4 2025, representing nearly 40% year-over-year growth. Perhaps more significantly, the number of customers with over $5 million in annual contract value surged to 603, reflecting approximately 20% year-over-year expansion.

ServiceNow’s artificial intelligence initiatives played a transformative role in driving this customer expansion. The Now Assist platform demonstrated exceptional traction, with monthly active users growing 25% and new annual contract value surpassing $600 million. Now Assist NNACV more than doubled year-over-year, fueled by 35 enterprise-scale deals exceeding $1 million each. This AI-powered offering has become integral to the company’s competitive positioning.

The company’s broader AI portfolio delivered outsized results. RaptorDB Pro more than tripled net new annual contract value year-over-year, securing 13 deals above $1 million. Workflow Data Fabric featured prominently in 16 of the company’s top 20 quarterly deals, with attach rates improving sequentially throughout 2025. Overall, workflows and transactions each surged more than 33%, growing from $60 billion to $80 billion and from $4.8 trillion to $6.4 trillion respectively. The AI Control Tower product nearly tripled its deal volume sequentially, signaling accelerating adoption.

Strong Profitability and Robust Cash Generation

Operationally, ServiceNow maintained disciplined execution while scaling the business. Non-GAAP gross margin stood at 80.3%, while subscription gross margin reached 82.7%. Operating expenses declined 180 basis points as a percentage of revenues year-over-year to 64.2%, demonstrating improved operational leverage. The company expanded its non-GAAP operating margin 140 basis points year-over-year to 30.9%, highlighting the scalability of the business model.

Cash generation proved particularly impressive. Operating cash flow reached $2.24 billion in the quarter, substantially exceeding the prior quarter’s $813 million. Free cash flow surged to $2.03 billion, compared with $592 million in the previous quarter, while free cash flow margin improved to 57% from 47.5% year-over-year. This financial flexibility enabled the company to return capital to shareholders through 3.6 million shares repurchased and a new $5 billion share repurchase authorization alongside a $2 billion accelerated share repurchase program.

Bullish Guidance Sets Stage for Sustained Growth Through 2026

Management’s forward guidance reinforces confidence in the company’s trajectory. For 2026, ServiceNow projects subscription revenues between $15.53 billion and $15.57 billion, implying growth of 20.5% to 21% on a GAAP basis and 19.5% to 20% on a constant currency basis. Non-GAAP subscription gross margin is expected to stabilize at 82%, while the company targets a 32% non-GAAP operating margin—100 basis points above the prior year.

Free cash flow margin is anticipated to reach 36%, up 100 basis points year-over-year, signaling continued strong cash generation despite ongoing investment in growth initiatives. For the first quarter of 2026, the company expects subscription revenues between $3.65 billion and $3.67 billion, representing 21.5% year-over-year growth on a GAAP basis.

The guidance accounts for approximately 150 basis points of headwind from a strategic mix shift toward hosted revenues, reflecting strong adoption of the company’s hyperscaler offerings. Current remaining performance obligations are projected to grow 22.5% on a GAAP basis and 20% on a constant currency basis, providing visibility into future revenue realization.

Analyst Assessment and Investment Outlook for NOW Stock

Since the earnings release, analyst estimates have shifted upward by 5.32%, reflecting renewed confidence in the company’s execution. From a valuation perspective, ServiceNow carries a Zacks Rank of #3, indicating analysts anticipate in-line market returns over the coming months. The stock demonstrates strong growth characteristics with an A-rated Growth Score, though momentum metrics remain moderate at B-rated. Valuation metrics are less compelling at D-rated, placing the shares in the lower quartile from a value investing perspective.

The intersection of exceptional business fundamentals, strategic AI capabilities, and strong forward guidance suggests NOW share price could benefit from sustained investor interest, though near-term sentiment may remain measured given current valuation levels and broader market conditions.