Why Should ServiceNow Stock Holders Watch This One Number?
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For investors who own ServiceNow (NOW), one number may matter more than the rest: current backlog. Management calls this signed business a good indicator of revenue in 2027, and it stood at $13.65 billion at the end of September 2026. Management expects the backlog to grow more slowly in the December quarter, even as subscription revenue grows faster. Why would the backlog and subscription revenue move apart?
Why Does ServiceNow Expect Its Backlog Growth To Slow?
Management gave four reasons on its October 28, 2026 call and said three would not hurt revenue. One is a small backlog headwind from extra spending to help customers deploy its products. The first reason involves timing. Customers renewed contracts early in the September quarter. Management said those early renewals made up about half of the backlog’s 100 basis point beat on its own forecast, leaving those same deals absent from the December quarter.
Management provided figures for two of the other reasons. Strong public sector demand is raising the share of on-premise sales in the December quarter. Management said this shift takes about 25 basis points, a quarter of a percentage point, off backlog growth but will count in revenue. Separately, certain contract provisions keep about 50 basis points of growth out of the backlog figure, and management said that growth will be included in revenue too.
That is how management squares a slower backlog with subscription revenue growth of 21.5% expected for the December quarter, up from 20.5% in the September quarter.
A Modest Slowdown In ServiceNow’s Backlog Growth
Current backlog grew 21% from a year earlier in fiscal Q3 2026, and management expects 18.5% growth in the December quarter, with both figures excluding currency swings. That is a slowdown of about two and a half percentage points, which is modest for a single quarter.
Investors should watch the slowdown because management has put figures on only part of it. The on-premise sales and the contract provisions account for less than one percentage point of the deceleration, and management gave no December-quarter figure for the early renewals.
Because the backlog represents signed business for the year ahead, a slower pace extending past December would point to slower revenue growth in 2027.
Is The Slowdown Already In ServiceNow’s Share Price?
The share price likely assumes some of this deceleration. ServiceNow stock fell 21.1% between October 6 and November 4, 2026, while the S&P 500 fell 1.6%. The largest one-day fall of the past year occurred on October 29, when the shares dropped 27%. That came the day after the results, as news reports tied the sell-off to the slower backlog forecast.
Even after that drop, investors pay 7.3 times sales for the shares, against 3.2 for the S&P 500, so the price likely still assumes growth well above the market’s. ServiceNow’s own multiple has rarely been lower. At the end of June 2026, the multiple stood at 7.0 times sales, marking its lowest point at any quarter end since 2016.
Other parts of the contract book are still growing. Total backlog reached $29.7 billion at the end of September, up 22.5% from a year earlier excluding currency swings, and management said the average customer contract keeps getting longer. Customers also renewed at a 98% rate in the quarter.
The worry is therefore real but moderate. A single quarter’s forecast is not a trend, and management has tied the slowdown to reasons, three of which by its account will not hurt revenue. Current backlog growth remains the number to watch when ServiceNow reports its December quarter, expected in January 2027.
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