Key Takeaways

  • ServiceNow delivered Q1 revenue of $3.77B, marginally exceeding forecasts, while EPS matched consensus at $0.97/share
  • Shares plunged 12% during after-hours trading Wednesday
  • Delayed Middle East deals related to the Iran conflict produced approximately 75 basis points of drag on subscription revenue growth
  • Large customers using NOW Assist generative AI expanded more than 130% year-over-year
  • Raymond James lowered its price target to $130 from $160 while maintaining an Outperform rating

ServiceNow (NOW) unveiled its first-quarter 2026 financial results Wednesday, delivering numbers that met analyst expectations yet failed to spark investor enthusiasm.

The enterprise software company recorded adjusted EPS of $0.97, matching analyst projections precisely. Revenue reached $3.77 billion, edging past the $3.75 billion consensus forecast. While technically a revenue beat, the market demanded stronger performance.

Shares tumbled 12% in after-hours trading. Heading into the earnings announcement, NOW had already declined 33% year-to-date, leaving investors hungry for a meaningful upside surprise rather than a narrow margin of victory.


NOW Stock Card
ServiceNow, Inc., NOW

Subscription revenue for the period reached $3.67 billion, slightly surpassing the $3.65 billion estimate. Management disclosed that growth faced approximately 75 basis points of pressure from postponed large on-premise deals in the Middle East, attributed to the ongoing Iran war.

This revelation drew significant attention. Geopolitical turmoil directly impacting a software provider’s quarterly performance represents an unusual earnings narrative.

Generative AI Momentum Remains Strong

Despite the market’s reserved response, one metric delivered genuinely impressive results. Large customers utilizing ServiceNow’s Now Assist generative AI platform—those with annual contract values exceeding $1 million—surged more than 130% compared to the prior year.

CEO Bill McDermott emphasized the 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 level of expansion holds significant weight for investors scrutinizing whether artificial intelligence delivers actual revenue generation beyond marketing buzz.

Raymond James analyst Michael Turtis reduced his price target on NOW to $130 from $160 following the release while maintaining his Outperform rating. He observed that upside across critical growth metrics tightened, with the gap between reported performance and investor guidance expectations stemming from acquisition integration, accounting variations, and the delayed Middle East transactions.

Forward Guidance Exceeds Expectations

The company’s forward-looking projections appeared stronger than the initial market reaction indicated.

For Q2, ServiceNow projected subscription revenue between $3.815 billion and $3.82 billion—surpassing the Street’s $3.75 billion forecast. Full-year subscription revenue guidance ranging from $15.7 billion to $15.8 billion also exceeded Wall Street’s $15.6 billion expectation.

Raymond James observed that ServiceNow’s organic outlook remained essentially stable. The firm highlighted that management intends to reveal at an upcoming analyst day that 2026 AI-related ACV projections have risen by 50%.

Shares traded at $103.07 following the announcement, down 45% over the preceding six months and substantially below the 52-week high of $211.48.

ServiceNow finalized its $7.75 billion acquisition of Armis, a cyber exposure management provider, earlier this year. The company also completed the Veza acquisition in March 2026. Raymond James indicated it would reevaluate its investment thesis before ServiceNow’s Knowledge conference scheduled for early May.