Earning Preview: ServiceNow revenue is expected to increase by 19.12%, and institutional views are predominantly positive
Earnings Agent01-21 11:22
Abstract
ServiceNow will release its quarterly results on January 28, 2026, Post Market. This preview outlines consensus expectations for revenue, margins, and adjusted EPS, reviews the prior quarter’s performance, highlights the current-quarter business drivers and risks, and summarizes the majority view from recent institutional commentary between July 21, 2025 and January 21, 2026.
Market Forecast
For the current quarter, market forecasts imply revenue of $3.53 billion, up 19.12% year over year, EBIT of $1.07 billion with an estimated YoY growth of 23.10%, and adjusted EPS of $0.88 with an estimated YoY increase of 20.26%. The market anticipates gross margin to remain near historical levels and net profitability to expand modestly YoY alongside operating leverage; the company’s own outlook implies resilience in core demand and stable pricing, though no formal gross margin guide is provided here.
ServiceNow’s main business remains subscriptions, expected to benefit from robust enterprise renewals and larger platform deals tied to workflow expansion. The most promising segment is subscriptions, projected at about $3.30 billion–$3.35 billion with a YoY increase implied by the consolidated growth trajectory.
Last Quarter Review
Last quarter, ServiceNow delivered revenue of $3.41 billion, a gross profit margin of 77.28%, GAAP net profit attributable to the parent of $0.50 billion with a net profit margin of 14.73%, and adjusted EPS of $0.96, with revenue growing 21.81% YoY and adjusted EPS rising 29.57% YoY.
A notable highlight was stronger-than-expected operating performance, with EBIT at $1.14 billion exceeding prior estimates. The company’s main business line, subscriptions, generated $3.30 billion, while professional services and other revenue was $0.11 billion, consistent with a services mix of roughly 3.17%.
Current Quarter Outlook
Core Subscription Platform
The core subscription platform is positioned to sustain double-digit growth as large customers consolidate vendors and expand workflows across IT service management, security operations, and customer/employee workflows. The estimate of $3.53 billion total revenue and implied subscription concentration near last quarter’s 96.83% mix point to ongoing durability in net new ACV and expansions. Upsell momentum from platform modules and seat expansion across global enterprises should support a favorable mix, helping maintain gross margin around last quarter’s 77.28% while driving operating leverage. Deal cycles remain sensitive to macro budgeting, but renewal rates and multi-year commitments continue to anchor revenue visibility and underpin the projected 19.12% YoY growth.
High-Potential Growth Areas within Subscriptions
Within the subscription base, larger platform deals and cross-suite adoption are poised to deliver the greatest incremental growth this quarter. The previous quarter’s $3.30 billion subscription revenue base, coupled with the market’s consolidated growth trajectory, implies that cross-sell into security operations and employee workflows could provide outsized contribution. The combination of generative AI add-ons and workflow automation enhancements can raise average contract values, supporting the projected EBIT growth of 23.10%. Execution risk lies in the timing of large enterprise signings and procurement scrutiny; nonetheless, pipeline commentary and last quarter’s EBIT outperformance suggest disciplined deal execution and cost control.
Key Stock Price Drivers This Quarter
Three factors are most likely to influence the stock reaction around this print: the cadence of large-deal signings, the monetization of new AI-driven offerings, and the trajectory of operating margin expansion. A steady flow of $1.00 million-plus deals and healthy net expansion rates would support the revenue guide and fortify confidence in second-half run-rate. Clear evidence of paid adoption for AI features—beyond trials—would provide a positive read-through for multi-year pricing power and per-seat uplift. Finally, any demonstration of operating efficiency that keeps EBIT growth above revenue growth, close to the 23.10% vs. 19.12% setup, would likely be viewed as a constructive signal for full-year margin durability.
Analyst Opinions
Across recent institutional commentary gathered between July 21, 2025 and January 21, 2026, the majority stance is bullish, emphasizing durable subscription momentum, high renewal rates, and a constructive setup for operating leverage. Several well-followed sell-side voices highlight that last quarter’s EBIT outperformance and adjusted EPS beat create room for modest upside to consensus if large deals close on schedule and AI monetization begins to contribute. The bullish view expects revenue growth around 19.12%–19.25% with incremental margin expansion, and sees the near-term risk-reward skewed toward execution upside, provided macro conditions do not materially deteriorate around enterprise IT budgets.Disclaimer: Investing carries risk. This is not financial advice. The above content should not be regarded as an offer, recommendation, or solicitation on acquiring or disposing of any financial products, any associated discussions, comments, or posts by author or other users should not be considered as such either. It is solely for general information purpose only, which does not consider your own investment objectives, financial situations or needs. TTM assumes no responsibility or warranty for the accuracy and completeness of the information, investors should do their own research and may seek professional advice before investing.
