ServiceNow's Forecast Cuts Both Ways as RBC Trims Its Target but Keeps the Faith

ServiceNow shares slipped 3.2% in the latest session, and the pressure traces back to a quarterly report that left the growth outlook short of what analysts had penciled in. The miss on adjusted earnings per share — $1.00 against an expected $1.02 in the third quarter of 2026 — accounts for part of the drag. The bigger question for investors is whether the company's AI partnerships can be converted into hard business results, or whether the softer guidance signals a longer stretch of headwinds.

RBC Capital Markets offered a nuanced response on Thursday, lowering its price target to $165 from $176 while keeping an "Outperform" rating. The brokerage pointed to results and a quarterly outlook that came in below expectations. That combination — a trimmed target paired with an unchanged positive rating — captures the tension running through the investment case. RBC marked down its valuation without abandoning its constructive view, which argues neither for an unbroken success story nor for a full retreat from the stock.

cRPO Becomes the Yardstick

At the heart of the debate sits the expected growth in remaining performance obligations, or cRPO. ServiceNow guided for 18.5% currency-adjusted growth in the fourth quarter of 2026 — a figure that, according to Bloomberg, fell short of analyst expectations. As of September 30, cRPO stood at $13.65 billion, representing 21% growth on a currency-adjusted basis. The gap between that reported pace and the forecast is precisely the deceleration drawing investor attention.

Two separate questions need untangling: is ServiceNow still growing, and is it growing fast enough to satisfy market expectations? The outlook answers the first in the affirmative. The share price reaction and RBC's target cut show that answer alone won't support a richer valuation. A recovery would require the company to ease doubts about its forward growth momentum.

Subscription Revenue Still Makes the Case

The operating business continues to supply ammunition for the bullish reading. Subscription revenue reached $3,988 million in the third quarter of 2026, with currency-adjusted growth of 20.5%. ServiceNow also lifted its full-year outlook, projecting subscription revenue of $15,780 million to $15,790 million for 2026 and a free cash flow margin of 36%. In other words, the company has paired a more cautious near-term growth forecast with higher annual targets.

For the fourth quarter specifically, management guided subscription revenue to a range of $4,245 million to $4,255 million. Hitting that band while confirming the announced cRPO trajectory would reinforce confidence in the reliability of the outlook. A stabilization of expectations may matter more than a simple repeat of past growth figures.

AI Deals Cut Both Ways

The partnership front has been busy. On Wednesday, ServiceNow announced an expansion of its collaboration with OpenAI, covering models and agents for workflows in development and security, a ServiceNow plugin for ChatGPT, OpenAI functions for cybersecurity within its security and risk solutions, and broader employee access to ChatGPT Work and Codex. Some capabilities are slated for 2027, meaning they offer a medium-term perspective rather than an immediately available product line.

A day earlier, the company unveiled an expanded tie-up with Google Cloud that connects ServiceNow's industry solutions with Gemini Enterprise across telecommunications, retail, sales and IT. In the optimistic scenario, these integrations would widen the range of use cases and support demand for ServiceNow's offerings. In the positive reading, the OpenAI expansion would also strengthen the company's own AI positioning and counter fears of being displaced by the technology. Neither deal, however, guarantees commercial success on its own.

The Skeptical Case Holds Sway

The bearish argument takes the weaker growth outlook seriously. Should cRPO momentum soften further, the latest guidance could read less as prudent planning and more as a signal of persistent headwinds. The risk isn't confined to missing a number. When investors doubt both the pace of growth and the company's resilience to AI-driven disruption, a positive rating demands more evidence. The OpenAI collaboration doesn't yet answer those questions with measurable business results.

Thursday's analyst reactions reflected that uncertainty. According to media reports, price target cuts dominated after the quarterly update, with the weaker cRPO development and the outlook cited among the reasons. A handful of firms raised their targets instead, so the response was not uniformly negative — but the emphasis shifted decisively toward the quality of growth.

The sector backdrop adds another layer. Reuters reported on Thursday that software stocks fell following results from ServiceNow and Fortinet, with worries about potential AI-driven upheaval weighing on the sector. ServiceNow thus finds itself caught between two expectations: enabling AI for customers while demonstrating that the technology supports its own growth. If investors come to view AI primarily as a threat to existing software offerings, partnership announcements alone are unlikely to restore confidence.

What the Next Report Must Prove

Even RBC's unchanged "Outperform" verdict doesn't dissolve that caveat. The simultaneous target cut shows that a fundamentally positive view can coexist with reduced expectations. Anyone betting on a recovery should keep that distinction in mind: analyst confidence is no substitute for operational confirmation.

As long as ServiceNow meets its revenue guidance and confirms the announced cRPO growth, a stabilization of trust remains plausible. Tangible commercial traction from the expanded OpenAI partnership would provide additional support. If growth instead falls behind the already muted forecast, the skeptical reading gains ground — and the issue would no longer be disappointed expectations for the outlook, but the outlook's reliability itself.

The next concrete test is therefore the fourth quarter of 2026. For investors, what counts is whether ServiceNow backs up its forecast operationally. The recovery thesis doesn't need a new announcement — it needs solid results.