ServiceNow kicked off its 2026 earnings season with a strong first quarter, including beating its guidance across all key metrics and raising its full-year outlook. However, the results showed that after-hours trading was down about 13%, reflecting lingering investor uncertainty about the pace of the company’s AI-driven growth.
Subscription revenue was $3.67 billion, up 22% year-over-year and above our highest target.
Current remaining performance obligations (committed revenue expected to be recognized in the next 12 months) increased 21% on a constant currency basis to $12.64 billion, up 100 basis points.
Full-year subscription revenue guidance was revised upward to between $15.74 billion and $15.78 billion, implying growth of roughly 22-22.5%.
AI is the central narrative
CEO Bill McDermott The call laid out five areas he called “high growth” for the business: core IT, AI security, AI-powered CRM, employee experience front door, and workflow data fabric.
His arguments for all five were consistent. ServiceNow’s 22 years of enterprise workflow data, context engine, and position as the operational backbone of large enterprises gives it advantages that AI model providers cannot replicate.
He said the platform has processed 95 billion workflows and over 7 trillion transactions, and the context it has accumulated is what makes AI decisions trustworthy and auditable at enterprise scale.
Now, the company’s core AI product, Assist, continues to perform exceptionally well.
The number of customers spending more than $1 million in annual contract value increased by more than 130% year over year.
McDermott also said ahead of the scheduled Financial Analyst Day announcement that the company’s 2026 AI ACV target has increased from $1 billion to at least $1.5 billion.
Argument being materialized
Three arguments stood out throughout the call.
Moveworks, the conversational AI company it acquired earlier this year, rebranded and integrated with ServiceNow’s employee experience product, launching EmployeeWorks in February. EmployeeWorks is an integrated AI front door that connects natural language requests to managed workflows across enterprise systems.
In its first full quarter within ServiceNow, Moveworks closed more seven-figure deals than in the entire previous year.
Armis, a cybersecurity asset visibility company that was acquired for about $8 billion and shuttered ahead of schedule, provides ServiceNow with what McDermott describes as a complete end-to-end security stack. It combines real-time device discovery from Armis, identity governance from Veza, and existing security and workflow capabilities from ServiceNow.
Armis is already deployed in nine of the Fortune 10, and McDermott specified that the security opportunity is one of the biggest opportunities he has seen for the company.
Both acquisitions bring margin headwinds in the near term, and ServiceNow CFO Gina Mastantuono has made it clear that full normalization is not expected until 2027.
Business model in transition
One of the most significant revelations about the currency came from McDermott’s update on the price.
Now 50% of net new business comes from non-seat based models such as tokens, infrastructure, connectors and other consumption based mechanisms.
For a company historically built on predictable seating licensing, this represents a meaningful structural change, which McDermott frames as providing flexibility without sacrificing the predictability customers value.
Mastantuono also noted that enterprise customers’ AI investments are being funded from a variety of sources, including new budgets as well as labor cost savings and point solution integration. ServiceNow is not simply a new item, but is establishing itself as a platform where platform companies are integrated.
Partners and Proving Points
The call also highlighted a deepening partner ecosystem through the direct integration of OpenAI’s voice and text models into the ServiceNow platform.
Claude is built-in for Google Gemini agents and developers who work with ServiceNow AI experts across 5G, retail, and IT operations.
McDermott framed this as an entry point rather than a competitive threat. ServiceNow serves as the governance and execution layer through which model providers approach the enterprise.
The company is also working hard internally. ServiceNow’s own AI agents now resolve 90% of employee IT cases at 99% faster than human agents, allowing the company to maintain headcount while growing revenue at what McDermott describes as the “Rule of 56” pace.
Headwinds and Investor Questions
However, this quarter was not without complications.
Ongoing regional conflicts have delayed the closing of on-premise transactions in the Middle East, suppressing subscription revenue growth by approximately 75 basis points.
Because these transactions consist of lump-sum on-premise revenue rather than assessable subscription revenue, timing delays have a significant impact.
Mastantuono said some of these deals had already closed by the time the earnings were reported.
Analysts on the call pressed management at a time when AI revenue acceleration is becoming more visible at scale.
Mastantuono postponed these questions until Financial Analyst Day in Las Vegas on May 4. There, the company promised a full long-term plan along with its product announcement.
Meanwhile, McDermott’s message to investors was characteristically direct. “Believe what you see.”