ServiceNow Inc. (NYSE:NOW) reported first-quarter results after the market close Wednesday, topping Wall Street estimates, while warning that ongoing tensions in the Middle East could delay deals through the rest of the year.
Earnings Snapshot
The company posted first-quarter revenue of approximately $3.77 billion, beating the consensus estimate of $3.74 billion, according to Benzinga Pro.
The software solutions company reported adjusted EPS of 97 cents for the quarter, narrowly beating analyst estimates of 96 cents.
ServiceNow expects second-quarter subscription revenue of $3.815 billion to $3.82 billion, representing approximately 21% to 21.5% growth.
CFO Gina Mastantuono said, “Our guidance captures that momentum while taking a prudent view of the geopolitical environment, particularly the conflict in the Middle East and its potential impact to deal timing.”
Conference Call Takeaways
ServiceNow closed 16 deals greater than $5 million in net new ACV, including 5 deals exceeding $10 million. It ended the quarter with 630 customers generating over $5 million in ACV.
Customer expansion remained strong, with the number of customers spending over $1 million growing more than 130% year over year, while deals above $1 million increased over 30% year over year.
The company highlighted rapid AI adoption, with deals involving three or more Now Assist products growing nearly 70% year over year, putting it on track to exceed its $1 billion AI target for 2026.
ServiceNow underscored a major AI-led growth opportunity, positioning its AI control tower within a total addressable market estimated at $600 billion.
Recent acquisitions—Armis, VESA, and Moveworks—are expected to strengthen its AI capabilities, especially across security and employee experience solutions.
ServiceNow increased its full-year 2026 subscription revenue outlook by $205 million at the midpoint to 15.735 billion to 15.775 billion, representing 20.5% to 21% Y/Y growth on a constant currency basis. This includes a 125 basis point contribution from the Armis buyout.
The company now expects a subscription gross margin of 81.5% and an operating margin of 31.5%, reflecting headwinds of 25 and 75 basis points from Armis, respectively in the year.
Management reiterated its focus on driving faster revenue growth, expanding margins, and advancing AI innovation, maintaining a positive outlook on how AI will shape its business.
For the second quarter, operating margin is projected at 26.5%, incorporating a 125 basis point headwind from Armis.
Analyst Consensus & Recent Actions: The stock carries a Buy Rating with an average price target of $164.61. Recent analyst moves include:
- BTIG: Buy (Maintains Target to $185.00) (April 20)
- Deutsche Bank: Buy (Lowers Target to $135.00) (April 16)
- TD Cowen: Buy (Lowers Target to $140.00) (April 16)
ServiceNow ETF Exposure and Fund Flows
- iShares Expanded Tech-Software Sector ETF (BATS:IGV): 4.38% Weight
- SPDR MSCI USA Gender Diversity ETF (NYSE:SHE): 2.92% Weight
- Trenchless Fund ETF (NYSE:RVER): 6.86% Weight
NOW Price Action: ServiceNow shares were down 13.82% at $88.83 during premarket trading on Thursday, according to Benzinga Pro data.
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