April 22nd, 2026

The call portrayed strong execution: ServiceNow beat Q1 targets across subscription revenue, RPO, operating margin and free cash flow, reported robust large‑deal activity and rapid adoption of AI products (Now Assist, Employee Works, AI Control Tower) with upward revision to AI expectations (from $1B to ~$1.5B). Management closed Armis early and raised 2026 subscription revenue midpoint by $205M (125 bps contribution), while highlighting continued focus on margin expansion, SBC reductions and share buybacks. Key challenges were timing delays from Middle East on‑prem deals (~75 bps Q1 headwind), near‑term margin impacts from Armis integration (modest bps headwinds), and investor questions about inorganic vs. organic contribution/timing that led to a negative market reaction after hours. Overall the positives — strong beats, accelerating AI traction, large‑deal momentum, high renewal rates and cash returns — outweigh the limited timing and integration headwinds.

Company Guidance

ServiceNow raised its 2026 subscription revenue guidance to $15.735–15.775 billion (a $205 million increase at the midpoint), implying 20.5%–21.0% year‑over‑year constant‑currency growth and reflecting ~125 basis points of contribution from Armis; it now expects subscription gross margin of 81.5% (including a ~25 bp Armis headwind), non‑GAAP operating margin of 31.5% (including a ~75 bp Armis headwind), free cash flow margin of 35% (including a ~200 bp Armis headwind) and ~1.04 billion GAAP diluted weighted average shares outstanding. For Q2 2026 the company guided subscription revenues of $3.815–3.820 billion (≈21%–21.5% y/y cc), RPO/CRPO growth of ~19.5% cc (both including the same 125 bp Armis contribution) and an operating margin of ~26.5% (including a 125 bp Armis headwind), while noting prudent assumptions around Middle East on‑prem timing and expecting integration efficiencies to normalize margins in 2027.