ServiceNow Q1 Beats Estimates, Raises FY2026 Guidance on AI Demand
Software company reports 22% revenue growth despite Middle East conflict headwind; stock down 30% YTD
Quick Look
- ServiceNow reported Q1 adjusted EPS of 97 cents, beating the 96-cent estimate, with revenue of $3.77 billion versus $3.74 billion expected.
- The company raised its FY2026 subscription revenue guidance to $15.74-$15.78 billion, citing strong AI product demand despite a 75 basis point headwind from the Middle East conflict.
- Net income rose to $469 million, and the company completed its $7.75 billion Armis acquisition.
AI-generated summary
Why It Matters
ServiceNow is positioning itself as an 'AI control tower' and has been in a spending spree to achieve this. The company completed its $7.75 billion acquisition of cybersecurity startup Armis earlier this week, originally expected to close in the second half of 2026.
ServiceNow reported first-quarter results on Wednesday that narrowly beat Wall Street's estimates as the software company said the conflict in the Middle East dragged on subscription revenue. Here's how the company performed versus LSEG estimates: Earnings per share: 97 cents adjusted vs. 96 cents expected Revenue: $3.77 billion vs. $3.74 billion expected Revenue for the quarter grew 22% year over year. The company reported $469 million in net income, or 45 cents per share, a slight increase from $460 million, or 44 cents per share, a year ago. The company said in its release that subscription revenue growth during the quarter "saw an approximately 75 basis point headwind from delayed closings of several large on-premise deals in the Middle East, due to the ongoing conflict in the region." The company reported quarterly subscription revenues of $3.67 billion, slightly above the $3.65 billion expected by FactSet. ServiceNow increased its forecast of fiscal 2026 subscription revenues to fall between $15.74 billion and $15.78 billion, up from the forecast it made last quarter of $15.53 billion to $15.57 billion. "Our full-year guidance reflects a prudent assessment right now of the geopolitical environment," CFO Gina Mastantuono told CNBC. "I definitely took a little bit of incremental conservatism because of the ongoing conflict in the Middle East and its potential impact on deal timing." In the first quarter, ServiceNow repurchased about 20 million shares, more than double the amount purchased in all of 2025. On its last earnings call, the company announced board approval for an additional $5 billion in share buybacks. The Santa Clara, California-based company reported $12.64 billion in current remaining performance obligations for the quarter, beating estimates of $12.56 billion. It reported 16 transactions over $5 million in new annual contract value in the first quarter, an increase of almost 80% year over year. ServiceNow has been in a spending spree as it tries to position itself as an "AI control tower." The stock has had a rough start to 2026, down about 30% year to date. Mastantuono told CNBC that the company's AI product portfolio has continued to outperform and is on track to exceed the company's $1 billion target for 2026. The company also announced it was expanding its deal with Google Cloud. Earlier this week, ServiceNow completed its $7.75 billion acquisition of cybersecurity startup Armis, which was expected to close in the second half of the year.
Open Questions
- How exactly will the Middle East conflict resolution impact deal timing?
- What specific AI products are driving the $1B target?
- Will the 30% stock decline continue or reverse?
