Key Takeaways
- ServiceNow delivered Q1 revenue of $3.77B, edging past Wall Street’s $3.75B forecast, while EPS matched expectations at $0.97 per share
- Shares plunged 12% during after-hours trading on Wednesday
- Deal delays in the Middle East connected to the Iran conflict reduced subscription revenue growth by approximately 75 basis points
- Large customers using NOW Assist generative AI surged over 130% compared to last year
- Raymond James lowered its price target to $130 from $160 while maintaining an Outperform rating
When ServiceNow (NOW) unveiled its first-quarter 2026 financial results on Wednesday, the enterprise software giant delivered numbers that met Wall Street’s benchmarks—but that proved insufficient to satisfy investors hungry for more decisive outperformance.
SERVICENOW $NOW Q1’26 EARNINGS HIGHLIGHTS
🔹 Revenue: $3.77B (Est. $3.75B) 🟢; +22% YoY
🔹 Adj. EPS: $0.97 (Est. $0.97) 🟡
🔹 Subscription: $3.67B; +22% YoY
🔹 cRPO: $12.64B; +22.5% YoYFY Guide:
🔹 Revenue: $15.735 – 15.775B (Est. $16B) 🔴
🔹 Subscription Gross Margin: 81.5%… pic.twitter.com/zErLkNDyse— Wall St Engine (@wallstengine) April 22, 2026
The cloud-based platform provider reported adjusted earnings per share of $0.97, matching analyst projections precisely. Revenue reached $3.77 billion, marginally surpassing the consensus estimate of $3.75 billion. Technically speaking, these figures represented a beat. In practice, the market demanded stronger results.
Shares tumbled 12% in extended trading following the announcement. Heading into the earnings release, NOW had already declined 33% year-to-date—creating an environment where investors desperately sought a meaningful positive surprise rather than a narrow victory.
Subscription revenue totaled $3.67 billion for the period, barely exceeding the $3.65 billion forecast. However, management highlighted that growth faced approximately 75 basis points of pressure from postponed closings on significant on-premise contracts in the Middle East, attributed to the continuing Iran war.
This disclosure captured considerable attention. Geopolitical turmoil directly impacting a software provider’s quarterly performance represents an unusual narrative in earnings reports.
Artificial Intelligence Adoption Accelerates
Notwithstanding the cautious market response, the quarterly results contained a genuinely impressive highlight. Large enterprise customers for ServiceNow’s Now Assist generative AI platform—defined as those with annual contract values exceeding $1 million—expanded by more than 130% year-over-year.
CEO Bill McDermott emphasized this achievement: “Our AI growth is far exceeding even our own expectations, reinforcing our position as one of the fastest growing enterprise software companies ever.”
This expansion rate holds significant importance for investors scrutinizing whether artificial intelligence investments actually generate tangible revenue rather than mere marketing buzz.
Following the earnings release, Raymond James analyst Michael Turtis reduced his price target on NOW from $160 to $130, though he maintained his Outperform rating. He observed that upside momentum across critical growth indicators had narrowed, and the gap between actual results and investor expectations stemmed from acquisition integration factors, accounting methodology differences, and the deferred Middle East transactions.
Forward Projections Exceed Expectations
Looking ahead, management’s outlook proved more encouraging than the immediate market reaction suggested.
For the second quarter, ServiceNow projected subscription revenue between $3.815 billion and $3.82 billion—surpassing Wall Street’s $3.75 billion estimate. Full-year subscription revenue guidance of $15.7 billion to $15.8 billion similarly topped the $15.6 billion consensus forecast.
Raymond James highlighted that ServiceNow’s organic projections remained essentially stable. The firm additionally noted that management intends to reveal at an upcoming analyst day that 2026 AI-related annual contract value expectations have climbed by 50%.
Following the earnings announcement, shares traded at $103.07, representing a 45% decline over the preceding six months and substantially below the 52-week peak of $211.48.
ServiceNow finalized its $7.75 billion purchase of Armis, a cyber exposure management provider, earlier this year. The company also completed the acquisition of Veza in March 2026. Raymond James indicated it would reevaluate its investment thesis before ServiceNow’s Knowledge conference scheduled for early May.
