Key insights
- ServiceNow (NOW) experienced a significant stock price decline, losing approximately one-third of its market capitalization in a single day. This drop followed a Q3 earnings report that missed EPS and Free Cash Flow (FCF) expectations, coupled with a lowered Q4 cRPO guidance. Despite these misses, the company increased its 2026 FCF margin and reduced capex, while still reporting strong year-over-year growth in cRPO and FCF. The article questions the severity of the market's reaction given these positive underlying metrics and recent partnerships.
Can someone explain to me in plain English why $NOW got hammered as much as losing $50B, roughly 1/3 of its market cap, in 1 day?
Yes, it’s a double miss for EPS and FCF in Q3 and $NOW lowered its cRPO guidance for Q4.
But it increased its FCF margin to 36% for 2026 and reduced its capex. While still growing cRPO 21% YoY and FCF 20% YoY.
I don’t get how this business was loved by many people (if not almost everyone) for a few months (especially after partnering with NVIDIA and other hyperscalers) and now it’s hated and the stock drops 30% in 1 trading day.
Is Mr. Market overreacting (once) again?