NOW — ServiceNow, Inc.

ServiceNow Q1 2026 Earnings Call Summary

1. Key Financial Results and Metrics

• Subscription Revenue: $3.671 billion, up 19% year-over-year in constant currency, exceeding guidance.
• Remaining Performance Obligations (RPO): Approximately $27.7 billion, representing 23.5% year-over-year growth in constant currency.
• Current RPO: $12.64 billion, a 21% year-over-year increase, beating guidance by 100 basis points.
• Operating Margin: 32%, slightly above guidance.
• Free Cash Flow Margin: 44%.
• Customer Growth: 630 customers generating over $5 million in ACV, with 16 deals over $5 million and 5 over $10 million closed in Q1.

2. Strategic Updates and Business Highlights

• AI Initiatives: The company emphasized its AI control tower for business reinvention, with strong demand for Now Assist and AI-native products.
• Acquisitions: The early closure of the Armis acquisition is expected to expand the total addressable market (TAM) and accelerate subscription revenue growth.
• Moveworks Integration: The integration of Moveworks into ServiceNow's employee experience business has seen significant early success, with a 5x year-over-year growth.
• Hybrid Business Model: 50% of net new business now comes from non-seat-based pricing models, indicating a shift towards more flexible pricing structures.

3. Forward Guidance and Outlook

• 2026 Subscription Revenue Guidance: Raised by $205 million to a range of $15.735 billion to $15.775 billion, reflecting 20.5% to 21% year-over-year growth.
• Q2 Subscription Revenue Expectation: Between $3.815 billion and $3.820 billion, representing 21% to 21.5% year-over-year growth.
• Operating Margin Guidance: Expected to be 26.5% for Q2, including a headwind from Armis.

4. Bad News, Challenges, or Points of Concern

• Geopolitical Risks: Delays in large on-premise deals in the Middle East due to ongoing conflict impacted Q1 results, with potential implications for Q2.
• Integration Costs: Near-term headwinds to margins are anticipated as the company integrates Armis, although long-term benefits are expected.
• Market Competition: The competitive landscape for AI orchestration and agentic applications is becoming increasingly crowded, raising concerns about differentiation.

5. Notable Q&A Insights

• Customer Sentiment: Customers are excited about AI but uncertain about implementation, leading to a cautious spending environment.
• Revenue Composition: The company clarified that recent acquisitions had minimal impact on Q1 revenue, emphasizing strong organic growth.
• AI Revenue Projections: ServiceNow's AI revenue target for 2026 has been increased from $1 billion to $1.5 billion, reflecting strong demand and faster-than-expected adoption.
• Integration Focus: The integration of new acquisitions is a top priority, with expectations for significant upside as these products are fully integrated into the ServiceNow ecosystem.

Overall, ServiceNow reported strong financial results, driven by robust demand for AI solutions and successful integration of recent acquisitions, while navigating geopolitical challenges and a competitive market landscape.