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Investing.com -- ServiceNow reported better-than-expected third-quarter results, helped by strong demand for its AI-driven workflow tools. Shares rose 3% in premarket trading Thursday.
The enterprise software maker said earnings rose to $4.82 a share, beating analyst estimates of $4.26. Revenue grew 22% from a year earlier to $3.41 billion, topping forecasts of $3.35 billion.
Subscription revenue, its main business line, climbed 21.5% to $3.30 billion.
Current remaining performance obligations (CRPO) totaled $11.28 billion on a constant-currency basis, up 20.5% year over year. The growth rate slowed by 100 basis points from the previous quarter but came in roughly 250 basis points above the company’s guidance.
"Q3 CRPO beat was partially due to Q4 cohort pull-ins into Q3, of approximately 150bps," BMO Capital Markets analysts said.
ServiceNow said it exceeded guidance across all topline and profitability metrics and now expects higher subscription revenue, operating margin and free cash flow for 2025. The company forecasts fourth-quarter subscription revenue between $3.42 billion and $3.43 billion.
BMO analysts said they said the subscription revenue "was a bit disappointing, though NOW management called out that on-prem renewals impacted the sub rev guide."
"With the gov’t shutdown, NOW chose to guide prudently," Jefferies analysts said in a separate note.
"The stock has spent much of 2025 sideways due to slowdown fears, but with AI ACV growing rapidly and 2025 tracking to close on a high note, we see it primed for a rally," they added.
Chief Executive Bill McDermott said the quarter showed ServiceNow’s strength as an AI platform for business transformation, citing broad adoption across industries.
The company’s current remaining performance obligations rose 21% to $11.35 billion, while total remaining performance obligations increased 24% to $24.3 billion.
President and Chief Financial Officer Gina Mastantuono said growth was broad-based, with strong results in its U.S. Federal business and new AI products such as Now Assist and Workflow Data Fabric.
ServiceNow’s board approved a five-for-one stock split, subject to shareholder approval at a meeting scheduled for Dec. 5.
The company cautioned that U.S. Federal agencies are facing tighter budgets and potential deal-timing effects from the recent government shutdown, which could influence fourth-quarter results.
(Pratyush Thakur contributed to this report.)