ServiceNow Q1 Earnings Call Highlights

ServiceNow NYSE: NOW executives said first-quarter fiscal 2026 results exceeded guidance across key metrics, citing continued strength in subscription revenue, current remaining performance obligations (cRPO), operating margin, and free cash flow. Management also highlighted accelerating demand for its AI offerings, early traction from Moveworks integration, and an updated full-year outlook that incorporates the earlier-than-expected close of its Armis acquisition.

Quarterly results beat guidance; strong deal activity and renewals

Chairman and CEO Bill McDermott said ServiceNow “once again exceed[ed] our guidance metrics across the board,” pointing to 19% constant-currency subscription revenue growth, 21% constant-currency cRPO growth, 32% operating margin, and a 44% free cash flow margin.

President and CFO Gina Mastantuono provided additional detail, reporting Q1 subscription revenue of $3.671 billion, up 19% year-over-year in constant currency. She said results included “about a 75 basis point headwind from delayed closings of several large on-premise deals in the Middle East due to the ongoing conflict in the region.”

On backlog metrics, Mastantuono said RPO ended the quarter at approximately $27.7 billion, up 23.5% year-over-year in constant currency, while cRPO was $12.64 billion, up 21% year-over-year in constant currency and “a 100 basis point beat versus our guidance.”

Deal activity included 16 deals greater than $5 million in net new ACV and five deals above $10 million, according to both McDermott and Mastantuono. ServiceNow ended the quarter with 630 customers generating more than $5 million in ACV, and Mastantuono said five more customers crossed the $50 million threshold versus last year. She also said the renewal rate, inclusive of Moveworks, was 97%.

Workflow and industry demand described as broad-based

Mastantuono said demand was broad across workflows, noting the composition of large deals and product attach. Technology workflows had 33 deals over $1 million, including five over $5 million, she said. ServiceOps and IT asset management (ITAM) each appeared in 17 of the company’s top 20 deals, and security and risk was in 15.

She added that CRM and industry workflows were in 16 of the top 20 deals, with 16 deals over $1 million, “driven by strength in CPQ and Sales and Order Management.” Core business workflows were in 13 of the top 20, while “creative workflows” were in 16 of the top 20, she said.

By industry, Mastantuono said transportation and logistics led with net new ACV growth of more than 280% year-over-year. Financial services grew more than 65%, energy and utilities rose 45%, and telecom and media also produced what she called “robust growth.” She said the U.S. public sector outperformed, closing 10 deals over $1 million.

Mastantuono also said new logo ACV growth “accelerated to over 50% year-over-year in Q1,” including what she described as ServiceNow’s “largest net new logo deal ever at over $15 million.”

AI demand: Now Assist trajectory raised; packaging shifts to “AI native” tiers

McDermott and Mastantuono repeatedly pointed to momentum in Now Assist. McDermott said Now Assist net new ACV “continues to outperform even our expectations,” adding that the number of customers spending $1 million or more grew over 130% year-over-year, and deals above $1 million grew more than 30% year-over-year in Q1.

Mastantuono said Now Assist is “on a trajectory to exceed our billion-dollar target for 2026,” and later reiterated that customers are “moving past experimentation into full-scale, enterprise-wide AI investment.” She added that deals including three or more Now Assist products rose nearly 70% year-over-year, including 36 deals with five or more products.

During Q&A, McDermott said a prior goal of $1 billion of AI commit for 2026 now appears higher. “We’re already talking about $1.5 billion now, and it’s on a run,” he said. Mastantuono said the company is measuring that figure the same way it has historically, capturing “only the incremental contribution from the AI capabilities.”

President, Chief Product Officer, and COO Amit Zavery explained that AI capabilities are now embedded across product SKUs, while the “incremental assist part” will be counted as AI revenue. “It’s pretty straightforward, very easy to measure, easy to track,” Zavery said.

Moveworks integration, EmployeeWorks launch, and “Autonomous Workforce”

McDermott said Moveworks has been integrated into ServiceNow’s employee experience business and rebranded as “EmployeeWorks,” with former Moveworks CEO Bhavin Shah leading the business. McDermott said the combined business grew “5x year-over-year.”

Mastantuono said ServiceNow integrated Moveworks’ conversational AI and enterprise search with Employee Center Pro “in under three weeks,” launching EmployeeWorks as a unified AI front door in February. She said the company had already closed six deals above $1 million in net new ACV since launch.

The company also emphasized a broader “Autonomous Workforce” strategy. McDermott said ServiceNow’s own deployment is resolving 90% of employee IT requests, with an AI specialist resolving assigned cases 99% faster than human agents. Zavery, responding to a question about level-one support, said ServiceNow can reduce typical resolution times “from around two days” to “less than 20 minutes,” while also expanding monetization opportunities through its assist pricing structure.

Armis acquisition closes early; guidance raised with margin headwinds noted

Mastantuono said ServiceNow’s acquisition of Armis closed earlier than expected, and that the deal will “significantly expand our TAM and accelerate our subscription revenue growth.” She cautioned that the company expects “near-term headwinds to margins as we integrate the business this year,” but said AI efficiencies and platform leverage are expected to normalize margin expansion “in 2027 and beyond.”

For full-year 2026, Mastantuono raised subscription revenue guidance by $205 million at the midpoint to $15.735 billion to $15.775 billion, representing 20.5% to 21% constant-currency growth. She said the guidance includes a 125-basis-point contribution from Armis.

• Full-year 2026 subscription gross margin: 81.5% (includes 25 bps headwind from Armis)
• Full-year 2026 operating margin: 31.5% (includes 75 bps headwind from Armis)
• Full-year 2026 free cash flow margin: 35% (includes 200 bps headwind from Armis)

For Q2, Mastantuono guided subscription revenue to $3.815 billion to $3.820 billion, representing 21% to 21.5% constant-currency growth, and cRPO growth of 19.5% in constant currency. She said both subscription revenue and cRPO include a 125-basis-point contribution from Armis. Q2 operating margin guidance was 26.5%, including a 125-basis-point headwind from Armis.

Addressing questions about the Middle East, McDermott said the company was not “making any excuses,” but noted that sovereign cloud activity in the region is recognized as on-premise revenue, which is not ratable and can affect timing. Mastantuono added that ServiceNow kept its full-year guidance and “didn’t reduce it for any potential conflicts.”

In capital returns, Mastantuono said ServiceNow executed a $2 billion accelerated share repurchase in Q1, buying back approximately 20.2 million shares, and ended the quarter with about $4.2 billion of remaining authorization.

Management repeatedly pointed investors to upcoming events for additional detail, including ServiceNow’s Knowledge conference and a May 4 Financial Analyst Day in Las Vegas, where Mastantuono said the company plans to provide more color on longer-range plans and AI consumption trends.

About ServiceNow NYSE: NOW

ServiceNow NYSE: NOW is a cloud computing company that builds enterprise software to manage digital workflows and automate business processes. Its offerings are designed to replace manual work and legacy systems with cloud-based, service-oriented applications that support IT operations, customer service, human resources, security response and other enterprise functions.

The company's flagship product family is the Now Platform, a suite of subscription software and platform services that includes IT Service Management (ITSM), IT Operations Management (ITOM), IT Business Management (ITBM), Customer Service Management (CSM), HR Service Delivery, Security Operations and Asset Management.

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