NEW YORK, July 20, 2026, 11:05 EDT
- Shares of ServiceNow declined by 2.7% to $100.50 during late-morning trade. The iShares software-sector ETF (NYSEARCA:IGV) edged down 0.3%.
- Analyst forecasts ahead of the release project revenue between $3.92 billion and $3.93 billion. Adjusted earnings are expected to come in at $0.86 per share.
- Management forecasts cRPO growth of 19%, which is below the subscription-revenue growth target of 22.5%.
ServiceNow’s top-line revenue target provides limited new insight. The $3.92 billion consensus estimate closely aligns with the company’s prior outlook combined with first-quarter services revenue.
The company forecasted Q2 subscription revenue in the range of $3.815 billion to $3.820 billion. Factoring in Q1’s services run rate of $99 million results in an estimate of about $3.917 billion. This is approximately $3.5 million under the Zacks consensus.
This makes revenue a less reliable indicator. Backlog provides the real measure.
ServiceNow reported $27.7 billion in remaining performance obligations (RPO) at the end of Q1, marking a 25% increase and amounting to nearly double its trailing revenue. Current RPO climbed 22.5% to $12.64 billion.
The comparison presented below is based on ServiceNow’s most recent financial results, its guidance for the second quarter, as well as the latest analyst projections.
| Metric | Q1 2026 actual | Q2 2026 benchmark | Investor read |
|---|---|---|---|
| Total revenue | $3.770 billion | $3.92-$3.93 billion consensus | Miss against consensus |
| Subscription revenue | $3.671 billion; +22% | $3.815-$3.820 billion; +22.5% | Growth pace sustained |
| Current RPO | $12.64 billion; +22.5% | +19% company guide | Growth cooling |
| Total RPO | $27.7 billion; +25% | No company target | Robust long-term pipeline |
The stated cRPO guidance is 3.5 percentage points lower than the subscription growth rate. When adjusted for constant currency, the difference narrows to 1.5 to 2 points. This could indicate that revenue is being recognized more rapidly than short-term obligations are increasing. This is an observation, not a prediction of bookings.
Armis accounts for approximately 1.25 points in each of the projected growth rates. The difference cannot be attributed to acquisition math. Certain Armis contracts include termination-for-convenience provisions, which restrict their impact on cRPO.
International Business Machines NYSE:IBM underscored worries about budgets last week. The company reported preliminary Q2 revenue of $17.2 billion, a 1% increase. Analysts’ forecasts had been $17.86 billion. CEO Arvind Krishna said “numerous large deals” failed to close as customers redirected spending to servers, storage and memory. Reuters
ServiceNow began the second quarter with more robust contractual indicators. The company completed 16 transactions in the first quarter, each surpassing $5 million in net new annual contract value, marking an increase of nearly 80%. By the end of March, ServiceNow reported 630 customers with annual contract values above $5 million.
Benchmark analyst Yi Fu Lee described ServiceNow as “one of the most misunderstood large-cap software names.” Lee noted that IBM and ServiceNow have different approaches to growth and business models. TipRanks
Monday trading indicated investors remain cautious. Shares in ServiceNow dropped 2.7%, while IGV slipped 0.3%.
Brokers remain divided. Cantor Fitzgerald lifted its target to $141 on Monday. D.A. Davidson lowered its price target to $170 but maintained a Buy rating. CLSA initiated coverage with an Underperform recommendation and a $72 price target.
A solid positive outcome would be cRPO growth at or above 19%, coupled with stable full-year guidance. Simply surpassing revenue expectations would not clarify the IBM comparison. Missing cRPO would reinforce the argument for budget-related delays.
Risks: cRPO is influenced by currency fluctuations, renewal schedules, contract timing and the blend of acquisitions. IBM remains much more exposed to mainframes. Performance in a single quarter may not indicate a broader trend for the software sector.
ServiceNow will release its results following the market close on Wednesday. The company’s earnings call is scheduled for 5 p.m. EDT.
