ServiceNow (NYSE:NOW)grew third-quarter subscription revenue 21% to about $4 billion, then guided for slower growth next quarter in its 12-month contracted backlog, known as cRPO. Shares fell about 23% in regular trading Thursday morning. Growth is still solid, but the leading indicator is cooling, and deal-related costs are cutting GAAP earnings nearly in half. cRPO counts contracted revenue due within 12 months, so it leads reported revenue. ServiceNow's fourth-quarter backlog guide trails its own 21.5% currency-neutral subscription revenue guide. When backlog grows slower than revenue, revenue growth usually follows it down. The raised target for AI annual contract value hasn't yet shown up as faster backlog growth. Adjusted EPS still rose to $1.00, since it leaves out stock-based pay, severance, and acquisition amortization (a non-cash charge on acquired assets), all of which grew. It can't exclude higher interest costs on new debt and lower interest income from cash spent on deals. Even adjusted subscription gross margin slipped, which may reflect costlier acquired revenue or heavier computing needs. The release gives no organic growth figure (growth excluding acquisitions), so readers can't see how much the deals supplied.
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