ServiceNow kicked off its 2026 earnings season with a strong first quarter, beating its own guidance across every major metric and raising its full-year outlook – yet the results were met with a roughly 13 percent drop in after-hours trading, reflecting lingering investor uncertainty about the pace of the company’s AI-driven growth.
Subscription revenue came in at $3.67 billion, up 22 percent year on year, above the high end of guidance.
Current remaining performance obligations – contracted revenue expected to be recognised in the next 12 months – grew 21 percent in constant currency to $12.64 billion, a 100 basis point beat.
Full-year subscription revenue guidance was raised to between $15.74 billion and $15.78 billion, implying growth of roughly 22-22.5 percent.
AI Is the Central Narrative
CEO Bill McDermott used the call to lay out five areas of what he called “hyper-growth” for the business: core IT, AI security, AI-native CRM, the employee experience front door, and Workflow Data Fabric.
His argument across all five was consistent – that ServiceNow’s 22 years of enterprise workflow data, its Context Engine, and its position as the operational backbone of large enterprises gives it an advantage that AI model providers cannot replicate.
The platform has processed 95 billion workflows and more than 7 trillion transactions, he said, and that accumulated context is what makes AI decisions trustworthy and auditable at enterprise scale.
Now Assist, the company’s core AI product, continues to outperform.
The number of customers spending more than $1 million in annual contract value grew over 130 percent year on year.
McDermott also disclosed – ahead of a planned Financial Analyst Day announcement – that the company’s AI ACV target for 2026 has been raised from $1 billion to at least $1.5 billion.
Acquisitions Taking Shape
Three acquisitions featured prominently throughout the call.
Moveworks, the conversational AI company acquired earlier this year, was rebranded and integrated with ServiceNow’s employee experience products to launch EmployeeWorks in February – a unified AI front door that connects natural language requests to governed workflows across enterprise systems.
In its first full quarter inside ServiceNow, Moveworks closed more seven-figure deals than it had in the entirety of the prior year.
Armis, the cybersecurity asset visibility company acquired for roughly $8 billion and closed ahead of schedule, gives ServiceNow what McDermott described as a complete end-to-end security stack – combining Armis’s real-time device discovery with Veza’s identity governance and ServiceNow’s existing security and workflow capabilities.
Armis is already deployed across nine out of ten Fortune 10 companies, and McDermott was explicit that the security opportunity is one of the largest he has seen in his time at the company.
Both acquisitions bring near-term margin headwinds, and ServiceNow CFO Gina Mastantuono was clear that full normalisation is not expected until 2027.
Business Model in Transition
One of the more significant disclosures on the call came from McDermott’s update on pricing.
Fifty percent of net new business now comes from non-seat-based models – tokens, infrastructure, connectors, and other consumption-based mechanisms.
For a company historically built on predictable seat licences, that represents a meaningful structural shift, and one that McDermott framed as giving customers flexibility without sacrificing the predictability they value.
Mastantuono also noted that AI investment at enterprise customers is being funded from multiple sources – not just new budgets, but labour cost reductions and point solution consolidation. ServiceNow is positioning itself as the platform enterprises consolidate onto, not just a new line item.
Partners and Proof Points
The call also highlighted a deepening partner ecosystem, with OpenAI’s voice and text models integrated directly into the ServiceNow platform,
Google Gemini agents working alongside ServiceNow AI specialists across 5G, retail, and IT operations, and Claude embedded for developers.
McDermott framed these not as competitive threats but as entry points – with ServiceNow acting as the governance and execution layer through which model providers reach the enterprise.
Internally, the company is also living the pitch: ServiceNow’s own AI agents now resolve 90 percent of employee IT cases, 99 percent faster than human agents, allowing the company to sustain headcount while growing revenue at what McDermott described as a “rule of 56” pace.
Headwinds and Investor Questions
But the quarter was not without complications.
Approximately 75 basis points of subscription revenue growth was held back by delayed on-premise deal closings in the Middle East, attributed to the ongoing regional conflict.
Those deals are structured as lump-sum on-premise revenue rather than ratable subscription income, so timing slippage carries an outsized impact.
Several of those deals had already closed by the time of the earnings call, Mastantuono said.
Analysts on the call pushed management on when the AI revenue acceleration becomes more visible at scale.
Mastantuono largely deferred those questions to Financial Analyst Day on May 4th in Las Vegas, where the company has promised a full long-range plan alongside product announcements.
McDermott’s message to investors in the meantime was characteristically direct: “Trust what you see.”
