ServiceNow (NOW) Financials

ServiceNow’s latest quarter shows continued strong revenue growth, healthy profitability, and a very solid liquidity position, but cash flow and balance sheet trends suggest the company is also spending aggressively on growth and acquisitions.

In Q1 2026, ServiceNow reported revenue of $3.77 billion, up from $3.57 billion in Q4 2025 and $3.09 billion in Q1 2025. That points to continued top-line momentum. Gross profit was $2.83 billion, with gross margin remaining strong at roughly 75%, which is a key strength for a software company.

Profitability remains positive, but operating income was only $503 million in Q1 2026, which means operating margin was about 13%. That’s still respectable, but it is lower than what investors would usually want to see from a premium software name. Selling and marketing costs remain large, with marketing expense alone at $1.216 billion in the quarter.

On the cash flow side, ServiceNow generated $1.67 billion in operating cash flow in Q1 2026, down from $2.24 billion in Q4 2025 but still a strong figure. However, financing and investing activities were both sizable outflows, including $2.23 billion in share repurchases and $1.33 billion in acquisitions. That pushed net cash change into negative territory for the quarter.

The balance sheet remains a major strength. ServiceNow ended Q1 2026 with:

• $2.70 billion in cash and equivalents
• $2.48 billion in short-term investments
• $4.47 billion in long-term investments
• $11.73 billion in total equity
• $24.38 billion in total assets

Current liabilities were $9.98 billion, driven mainly by $8.03 billion in deferred revenue. That is not necessarily a red flag for a subscription software company, since deferred revenue reflects future service obligations, but it does mean the company carries a large near-term liability base.

Looking at the longer trend, ServiceNow has shown steady expansion over the last four years:

• Revenue has risen meaningfully from $2.10 billion in Q1 2023 to $3.77 billion in Q1 2026
• Quarterly net income improved from $150 million in Q1 2023 to $469 million in Q1 2026
• Operating cash flow has generally remained strong, even as quarterly volatility increased
• Equity has grown from about $5.60 billion in Q1 2023 to $11.73 billion in Q1 2026

There are also a few items investors may want to watch carefully:

• ServiceNow continues to carry meaningful goodwill and intangible assets, likely from acquisitions
• The company’s cash balance is healthy, but it has been reduced by heavy buybacks and acquisitions
• Operating expenses remain elevated, especially marketing, which keeps margins below gross-margin levels

Potentially negative trends include the following:

• Net cash from operations fell from $2.24 billion in Q4 2025 to $1.67 billion in Q1 2026
• Share repurchases remain very large, which can pressure cash even though they support EPS
• Acquisition activity has been substantial and adds integration risk
• Current liabilities remain high relative to current assets, which keeps working-capital management important

Bottom line: ServiceNow still looks like a high-quality software business with strong revenue growth, healthy margins, and ample liquidity. The main watch items are heavy spending on growth, acquisitions, and buybacks, along with operating margin discipline. For retail investors, the company remains fundamentally strong, but the valuation will likely depend on whether it can keep scaling revenue without letting expenses climb too quickly.