NEW YORK, July 22, 2026, 12:05 p.m. (EDT) – Shares of ServiceNow NYSE:NOW declined as investors reacted to a lackluster Q2 backlog performance, even though the company reported an uptick in revenue.
- Shares of ServiceNow slipped 4.9% to $97.04 in late-morning trade. The company is set to release its second-quarter earnings following market close.
- Early consensus forecasts revenue at $3.93 billion and adjusted earnings at $0.86 per share.
- Morgan Stanley calculates that the cRPO consensus of 19.5% suggests about 17% organic growth following acquisitions.
By 11:50 a.m. EDT, ServiceNow shares dropped 4.9% to $97.04. Trading continued on U.S. exchanges, with the company’s earnings report set for release after the close.
The decline increases scrutiny on the contract backlog. Investors are examining whether main bookings have steadied as artificial intelligence influences software demand and pricing.
The decline affected most stocks but was not uniform. Salesforce NYSE:CRM dropped 3.2%, Workday NASDAQ:WDAY retreated 4.3%, and Oracle NYSE:ORCL eased 1.1%.
Analysts’ preliminary consensus expects revenue to reach $3.93 billion and adjusted EPS at $0.86, representing approximately 22% growth in sales and a 5% increase in EPS.
ServiceNow expects its Q2 subscription revenue to be between $3.815 billion and $3.820 billion. The company’s constant-currency current remaining performance obligations (cRPO) are projected to rise by 19.5%.
From an investor standpoint, the acquisition is central. ServiceNow reports Armis contributes approximately 1.25 percentage points to second-quarter subscription and cRPO expansion. Morgan Stanley projects that while cRPO consensus stands at 19.5%, the organic figure is closer to 17%.
| Metric | Q1 2026 actual | Preliminary Q2 bar | Acquisition-adjusted view |
|---|---|---|---|
| Subscription revenue increase, constant currency | 19% | 21%-21.5% company forecast | 19.75%-20.25% excluding Armis |
| cRPO increase, constant currency | 21% | 19.5% forecast and consensus | Roughly 17% organic, Morgan Stanley estimate |
| Non-GAAP operating margin | 32% | 26.5% company forecast | Roughly 28.5%, per Jefferies’ estimate |
The initial two columns are based on company guidance and first-quarter results. The last column reflects impacts from disclosed acquisitions and projections from named analysts.
Those numbers help explain why a headline beat may not end the discussion. Even with a 100-to-200-basis-point cRPO outperformance, organic growth could remain at around 18%-19%.
cRPO tracks contract revenue anticipated over the upcoming 12 months. In Q1, this metric climbed to $12.64 billion, an increase of 21% at constant currency. The Q2 outlook, by contrast, indicates a clear deceleration.
“The setup looks achievable,” Morgan Stanley analyst Sanjit Singh said. Singh noted that investors probably expect cRPO headline growth in the 20.5%-21.5% range. TipRanks
Jefferies anticipates potential for higher results, noting early renewals, better European trends and several seven-figure Now Assist deals in its recent checks. The firm also projects an operating-margin beat of around two points.
Advance purchases ahead of July 1 pricing adjustments in Australia could boost Q2, potentially complicating comparisons for the third quarter.
Reported metrics show continued strong momentum for AI. The number of customers with more than $1 million in spending on Now Assist rose by over 130% in Q1. CEO Bill McDermott said AI growth was “far exceeding even our own expectations.” ServiceNow Investor Relations
ServiceNow reports that over 50% of its new business adopts non-seat pricing. The company’s renewal rate remains steady at 97%, consistent with the 97%-98% range observed since early 2025.
Armis brings in additional revenue, though it reduces short-term profit levels. The $7.8 billion acquisition results in a 125-basis-point hit to Q2 operating margin. The full-year free-cash-flow margin will be weighed down by roughly 200 basis points.
The stock is currently trading at $97.04, down roughly 54% from its 52-week high of $210.20. Barron’s reported a 47% fall over the last year. The market has already factored in substantial execution risk.
Risks: Q2 cRPO might be overstated by early renewals or acquisitions. Delays in Middle East contracts, expenses related to integration, and weaker software spending could further impact guidance.
The earnings call is scheduled for 5 p.m. EDT. Key numbers to watch are organic cRPO growth and guidance for Q3. A standard EPS beat might not suffice.
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