ServiceNow kicked off its 2026 earnings season with a robust first quarter, beating its personal steering throughout each main metric and elevating its full-year outlook – but the outcomes have been met with a roughly 13 % drop in after-hours buying and selling, reflecting lingering investor uncertainty concerning the tempo of the corporate’s AI-driven progress.
Subscription income got here in at $3.67 billion, up 22 % yr on yr, above the excessive finish of steering.
Present remaining efficiency obligations – contracted income anticipated to be recognised within the subsequent 12 months – grew 21 % in fixed forex to $12.64 billion, a 100 foundation level beat.
Full-year subscription income steering was raised to between $15.74 billion and $15.78 billion, implying progress of roughly 22-22.5 %.
AI Is the Central Narrative
CEO Invoice McDermott used the decision to put out 5 areas of what he referred to as “hyper-growth” for the enterprise: core IT, AI safety, AI-native CRM, the worker expertise entrance door, and Workflow Information Material.
His argument throughout all 5 was constant – that ServiceNow’s 22 years of enterprise workflow knowledge, its Context Engine, and its place because the operational spine of huge enterprises offers it a bonus that AI mannequin suppliers can’t replicate.
The platform has processed 95 billion workflows and greater than 7 trillion transactions, he mentioned, and that collected context is what makes AI choices reliable and auditable at enterprise scale.
Now Help, the corporate’s core AI product, continues to outperform.
The variety of clients spending greater than $1 million in annual contract worth grew over 130 % yr on yr.
McDermott additionally disclosed – forward of a deliberate Monetary Analyst Day announcement – that the corporate’s AI ACV goal for 2026 has been raised from $1 billion to at the least $1.5 billion.
Acquisitions Taking Form
Three acquisitions featured prominently all through the decision.
Moveworks, the conversational AI firm acquired earlier this yr, was rebranded and built-in with ServiceNow’s worker expertise merchandise to launch EmployeeWorks in February – a unified AI entrance door that connects pure language requests to ruled workflows throughout enterprise techniques.
In its first full quarter inside ServiceNow, Moveworks closed extra seven-figure offers than it had within the entirety of the prior yr.
Armis, the cybersecurity asset visibility firm acquired for roughly $8 billion and closed forward of schedule, offers ServiceNow what McDermott described as a whole end-to-end safety stack – combining Armis’s real-time machine discovery with Veza’s id governance and ServiceNow’s current safety and workflow capabilities.
Armis is already deployed throughout 9 out of ten Fortune 10 firms, and McDermott was express that the safety alternative is without doubt one of the largest he has seen in his time on the firm.
Each acquisitions deliver near-term margin headwinds, and ServiceNow CFO Gina Mastantuono was clear that full normalisation just isn’t anticipated till 2027.
Enterprise Mannequin in Transition
One of many extra important disclosures on the decision got here from McDermott’s replace on pricing.
Fifty % of internet new enterprise now comes from non-seat-based fashions – tokens, infrastructure, connectors, and different consumption-based mechanisms.
For a corporation traditionally constructed on predictable seat licences, that represents a significant structural shift, and one which McDermott framed as giving clients flexibility with out sacrificing the predictability they worth.
Mastantuono additionally famous that AI funding at enterprise clients is being funded from a number of sources – not simply new budgets, however labour price reductions and level resolution consolidation. ServiceNow is positioning itself because the platform enterprises consolidate onto, not only a new line merchandise.
Companions and Proof Factors
The decision additionally highlighted a deepening associate ecosystem, with OpenAI’s voice and textual content fashions built-in immediately into the ServiceNow platform,
Google Gemini brokers working alongside ServiceNow AI specialists throughout 5G, retail, and IT operations, and Claude embedded for builders.
McDermott framed these not as aggressive threats however as entry factors – with ServiceNow appearing because the governance and execution layer by means of which mannequin suppliers attain the enterprise.
Internally, the corporate can be residing the pitch: ServiceNow’s personal AI brokers now resolve 90 % of worker IT instances, 99 % quicker than human brokers, permitting the corporate to maintain headcount whereas rising income at what McDermott described as a “rule of 56” tempo.
Headwinds and Investor Questions
However the quarter was not with out issues.
Roughly 75 foundation factors of subscription income progress was held again by delayed on-premise deal closings within the Center East, attributed to the continued regional battle.
These offers are structured as lump-sum on-premise income quite than ratable subscription revenue, so timing slippage carries an outsized influence.
A number of of these offers had already closed by the point of the earnings name, Mastantuono mentioned.
Analysts on the decision pushed administration on when the AI income acceleration turns into extra seen at scale.
Mastantuono largely deferred these inquiries to Monetary Analyst Day on Might 4th in Las Vegas, the place the corporate has promised a full long-range plan alongside product bulletins.
McDermott’s message to traders within the meantime was characteristically direct: “Belief what you see.”
