ServiceNow hits its Q2 earnings release tonight with a familiar tension intact: the stock is softer on the day, the sector is broadly lower, yet short sellers are still reducing positions rather than adding pressure ahead of the number.
The short base has continued its retreat, a trend documented across two recent notes and now reinforced by fresh data. Short interest fell another 5.4% over the past week to 27.9% of the free float — down from a mid-June peak near 64 million shares and now at the lowest level in roughly six weeks. The direction of travel is unambiguous. Borrow conditions confirm the same story: cost to borrow is a negligible 0.34%, down around 9% on the week, and availability is extraordinarily loose at more than 2,100% — meaning there are more than twenty shares available to lend for every one currently borrowed. The ORTEX short score has eased to 38.96, its lowest of the past fortnight, and is well below the highs above 40.5 seen in early July. Nothing in the lending market signals that bears are loading up for a negative reaction.
Options sentiment has shifted slightly since the July 19 preview. The put/call ratio climbed to 0.81 on Tuesday, above its 20-day average of 0.76 and roughly 1.5 standard deviations above the mean — a mild defensive tilt that wasn't present a few days ago when PCR was near its recent floor. It remains well below the 52-week high of 1.17, so this is caution at the margin rather than outright hedging. The combination — shorts retreating, borrow loose, options mildly defensive — points to a market that is tactically uncertain but not structurally bearish.
Analyst activity heading into the print has been mixed but mostly constructive on direction. Most recent moves clustered around the $130–$156 range: Oppenheimer lifted its target from $130 to $140, TD Cowen held at $140, and Truist raised to $130. Citigroup trimmed slightly to $156 while keeping its Buy. Goldman Sachs' Kash Rangan cut his target from $163 to $145 earlier this month — still Buy — reflecting some recalibration on near-term growth assumptions. DA Davidson moved its target down from $190 to $170, also maintaining Buy. The bear camp got fresh representation: CLSA initiated with an Underperform and a $72 target on July 20, a notable outlier well below the consensus mean of around $139. UBS, neutral on the stock, raised its target from $100 to $115. The analyst community is overwhelmingly constructive in rating terms, but the dispersion in price targets — from $72 to $170 — reflects genuine disagreement about the growth trajectory. The analyst recommendation differential ranks at the 94th percentile of the ORTEX universe, a notably strong reading.
The bull and bear debate centres on two different versions of the same company. Bulls point to FY25 NNACV growth of 9% year-over-year, the expansion of the platform beyond IT service management into HR and customer service, and a credible path to subscription revenue growth above 17% by FY27 — with AI monetisation accelerating. Bears counter with the CRPO miss — a $207 million sequential deficit described as the largest in the company's history — and a collapse in Federal Government obligations of 72% year-over-year. Open headcount is down 35%, and open sales positions have fallen a third. Those are not the metrics of a company operating at full momentum. EPS surprise ranks at the 35th percentile, below the sector median, and 90-day forward EPS momentum sits at the 45th percentile — both consistent with a market that has partially de-risked expectations.
Earnings reaction history adds relevant context. The previous two quarterly prints produced an average next-day decline of roughly 6.8%, with the April release falling 12.5% on the day and another 14% over the following week. The May print was marginally negative on the day but recovered over five sessions. The stock closed Tuesday at $102.06, down 2.5% on the session. Peers were broadly lower too: HUBS fell 5.5% and TEAM dropped 6%, while CRM slid 2.1% and WDAY dropped 4.1%. The day's weakness looks sector-wide rather than NOW-specific, which matters for interpreting tonight's reaction.
The key question heading into the print is whether the CRPO trajectory stabilises — the short base is clearly positioned for less bad news than the prior quarter delivered, but options traders have nudged slightly more defensive on the day, suggesting the market isn't fully comfortable with what a repeat miss would mean.
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