Original source：BernsteinFirst published on Unhidea：Original source date：
Key takeaway
The annualized value of a US government customer’s contract has grown, but a quarterly renewal may reduce how much of that growth is reflected in ServiceNow’s near-term cRPO; Bernstein also sees an opportunity to win broader business.
How much did the major government contract grow?
Bernstein’s channel checks found that the US Department of Veterans Affairs (VA) appears to have renewed its ServiceNow contract in September, with annualized contract value rising from 124 million dollars in the prior year to 153 million dollars, an increase of approximately 23% year over year.
The renewal uses quarterly terms instead of the usual annual terms. Bernstein believes this could create a difference between the contract’s growth and the near-term order metrics reflected in financial results.
How do quarterly terms affect financial reporting metrics?
cRPO can be understood as remaining performance obligations expected to be recognized over the next 12 months. Bernstein estimates that under annual terms, the renewal could increase cRPO by nearly 150 million dollars; under quarterly terms, the increase could be only a quarter of that amount or less, depending on the contract’s start date relative to quarter-end.
The firm estimates that this could create a reporting headwind of 80 to 100 basis points for cRPO growth. At the time, Bernstein did not know whether management had incorporated the quarterly terms into its third-quarter cRPO guidance when it released second-quarter results.
Why did the customer switch to quarterly renewals?
Based on public materials, Bernstein believes the VA is pursuing a multiyear IT transformation and expanding its functional requirements across multiple enterprise resource planning (ERP) business systems. The VA appears to have moved from initially considering a single vendor to accepting a multivendor approach.
Quarterly renewals allow the VA to adjust the contract flexibly while selecting vendors. ServiceNow therefore has an opportunity to expand from its existing IT solutions into broader business areas, but it must win additional share amid competition.
Bernstein says the VA expects to make a decision in December 2026. Transitioning to new vendors will take at least six months, and the VA hopes to complete it no later than September 2027.
What is Bernstein’s assessment of overall growth?
Bernstein expects ServiceNow’s organic growth to continue accelerating, based on newly launched AI-native products and the gradual inclusion of earlier headwinds to its US federal business in the comparison base.
The firm also sees additional demand from recent acquisitions, particularly Armis and Veza, against a backdrop of urgent cybersecurity needs.
Bernstein maintained its existing model, outperform rating and 266-dollar price target; the report lists a closing price of 158.18 dollars on 26 October 2026.
