ServiceNow (NYSE:NOW) reported first-quarter financial results on Wednesday. The transcript from the company’s first-quarter earnings call has been provided below.
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View the webcast at https://events.q4inc.com/attendee/481376230
Summary
ServiceNow reported strong Q1 2026 results with subscription revenue growth of 19% in constant currency, exceeding guidance.
The company highlighted a significant AI-driven expansion, with the AI control tower positioned at the center of a $600 billion total addressable market.
Recent acquisitions, including Armis, VESA, and Moveworks, are expected to enhance ServiceNow’s AI capabilities, particularly in AI security and employee experience.
ServiceNow raised its full-year 2026 subscription revenue guidance by $205 million, with a growth forecast of 20.5% to 21% year over year.
Management emphasized the company’s focus on accelerating revenue growth, margin expansion, and AI-driven innovation, with a bullish outlook on the impact of AI on its business model.
Full Transcript
Tiffany (Conference Operator)
Hello and thank you for standing by. My name is Tiffany and I will be your conference operator today. At this time I would like to welcome everyone to the first quarter 2026 ServiceNow earnings conference call. All lines have been placed on mute to prevent any background noise. After the speaker’s remarks, there will be a question and answer session. If you would like to ask a question during that time, simply press Star then be number one on your telephone keypad. I would now like to turn the call over to Darren Yip, Vice President of Investor Relations and Market Insights. Darren, please go ahead.
Darren Yip (Vice President of Investor Relations and Market Insights)
Good afternoon and thank you for joining ServiceNow’s first quarter 2026 earnings conference call. Joining me are Bill McDermott, our chairman and Chief Executive Officer, Gina Mastantuno, our President and Chief Financial Officer, and Amit Zaveri, President, Chief Product Officer and Chief Operating Officer. During today’s call, we will review our first quarter 2026 results and discuss our guidance for the second quarter and full year 2026. Before we get started, we want to emphasize that the information discussed on this call, including our guidance, is based on information as of today and contains forward-looking looking statements that involve risks, uncertainties and assumptions. We undertake no duty or obligation to update such statements as a result of any new information or future events. Please refer to today’s earnings press release and our SEC filings, including our most recent 10Q and 10K for factors that may cause actual results to differ materially from our forward looking statements. We’d also like to point out that we present non GAAP measures in addition to, and not as a substitute for financial measures calculated in accordance with GAAP. Unless otherwise noted, all financial measures and related growth rates we discuss today are non GAAP except for revenues, remaining performance obligations are RPO, current RPO and cash and investments. To see the reconciliation between these non GAAP and GAAP measures, please refer to our press release and investor presentation which are both posted on our website@investors.servicenow.com A replay of today’s call will also be posted on our website.
Bill McDermott (Chairman and Chief Executive Officer)
With that, I’ll turn the call over to Bill. Thank you very much Darren and welcome everybody to today’s call. There’s a lot of noise out there, so let’s get straight to the point. Here’s the ServiceNow update with the AI control tower for business reinvention in the center of a growing 600 billion plus total addressable market, we have a 28 billion RPO business that’s growing at 23.5% year over year, the most open enterprise platform that protects customer choice. With active users on our platform continuing to grow thousands of partnerships around the platform, expanding daily AI native packaging and pricing on our fully autonomous platform. A lot no sidecar AI at ServiceNow a world class team with a proven track record of building truly global businesses at scale. Our first quarter results are consistent with a company of this stature once again exceeding our guidance metrics across the board. Subscription revenue grew 19% in constant currency above the high end of our guidance CRPO. Constant currency was a robust 21% growth, one point above our guidance. Operating margin was 32%, a half a point above our guidance and free cash flow margin was 44%. We had 16 deals greater than 5 million in NNACV and 5 deals greater than 10 million in NNACV. Now Assist NNACV to date continues to outperform even our expectations. The number of customers spending a million plus grew over 130% year over year. Deals over a million grew more than 30% year on year. In Q1 Moveworks closed seven figure deals. In Q1 they closed more deals than they did the entire year. Last year now has merged with our Employee Experience business and rebranded as Employee Works. So Bhavan Shah, the former CEO of Move Works now runs the whole show there and that business grew 5x year over year. So we have a great story in Move Works coming into service now. Our sales CRM NNACV grew more than 5x year over year. That’s quintupled with deal count growing over 80% year over year. With a surface area so broad, our goals for ServiceNow are clear here. They are fast time to value for our customers. Revenue growth, acceleration, margin expansion, reduced stock based compensation and outperforming our own rule of 55 plus standard. To say we’re excited for Knowledge and Financial Analyst Day on May 4th in Las Vegas would be an understatement. We have a lot to share with you and the Board of Directors are very proud of ServiceNow and the way it’s performing. And the company is on track for our best year ever. Since our last print, speculation about enterprise AI has persisted. And that’s okay. That’s what earnings calls are for. To clear things up. My answer is always the same. There has never been a tailwind for ServiceNow like AI since Fred Luddy started the company. We’ve always focused our platform on the jobs our customers needed. Done. Let me bring this to life for you in five hyper growth areas. The first Our core IT business. There has never been a more compelling moment to be the CIO’s system of record. We’re often described as the ERP for IT. When an enterprise fully deploys ServiceNow, it’s not just software, it’s an end to end operating system. And today an average Fortune 500 company has 100 million lines of custom code to manage their business. And this excludes the code in other systems of record where there are billions and billions of lines of code. As code volume increases 20x by 2030, the complexity of managing this explosion of code will increase exponentially. The volume of tickets generated by this complexity will also explode. In this scenario, the number of tickets hitting an ITSM system will increase by 50x compared to today. The biggest IT buyer in the enterprise was, is and will continue to be the cio. This remit will substantially expand by the complexity of the agentic business. ServiceNow’s relevance grows in direct correlation with the expansion of innovation across the AI ecosystem. Think of us as the workhorse for workflow. The second is AI security. We’re thrilled that the ARMIS acquisition closed earlier than expected, which as you’ll hear from Gina, gives us some nice acceleration in full year subscription revenue growth. Yevgeny Divora, the excellent CEO of Armis, will run our security business building on ServiceNow’s outstanding foundation. And here’s the problem. Companies employing agents with zero visibility therefore they’re unable to see the unmanaged IoT OT and medical devices lacking unified access control with no coordinated way to remediate vulnerabilities before they become breaches. Today’s ServiceNow addresses this challenge holistically. As the asset intelligence foundation for the AI control tower, ARMIS solves visibility real time agentless discovery of every asset it ot IoT medical devices shadow it, a continuously updated map that traditional tools can never achieve. 9 out of 10 Fortune 10 companies already rely on Armis. We’re excited to deploy it throughout the top 2000 and beyond. Zeza solves the Identity Governance Patented access graph technology maps access across people, machines and AI agents in real time dynamic context Aware permissions that are governed continuously, not set once and forgotten. This is the active directory for AI agent identities. This business will continue to be run by the excellent CEO of Tarun Thakar. ServiceNow is the biggest piece of the puzzle. Our existing billion dollar plus security business ties everything together as the action layer for the CISO. Armis asset visibility plus VAESA’s identity governance plus ServiceNow’s business context CMDB equals a unified end to end security stack that could see, decide and act across the entire technology footprint. Nothing else in the market does this. Nothing With Mythos as one example, security activity is skyrocketing. The actions run through this platform alerts, tickets, actions, resolutions, they’re all revenue drivers for ServiceNow. Enterprises can’t afford experiments in today’s risk environment. They need ServiceNow as the strategic defense shield for the enterprise. The third is AI native CRM. We say AI control tower for business reinvention because there’s no more immediate need for reinvention than legacy CRM. You know it’s a little ironic that a category promising a 360 degree view of the customer has left most enterprises spinning around in circles. Best run businesses need a dramatically different and better way. Customers tell the story better than we can. A multi market European telco faced 85 plus fragmented applications, no standard quoting process and a CPQ setup where introducing a single new product took three months. ServiceNow sales CRM with CPQ collapsed this to one week. A global power technology leader across 190 countries has gone live with phase three of its ServiceNow deployment replacing legacy CPQ. Using AI driven blueprint automation, the company is reducing new product introduction time from six months to six weeks. A regional Latin American bank is live with ServiceNow building a full front office experience for relationship managers. Agenic AI is scanning portfolios and auto generating leads using Propensity Logic Tide to their data lake. Because legacy CRM represents such a significant expense line for enterprises, the demand for an AI alternative is immediate. ServiceNow is not only bringing a technology superior solution, we help customers swap out legacy SaaS, vendors and go live fast with AI. The fourth area is AI native front door and the employee experience. As people use more of their AI tools like ChatGPT, enterprise leaders urgently want their employees to enjoy a clean conversational experience. ServiceNow introduced employee works combining Moveworks, conversational AI and enterprise search with ServiceNow’s Unified Portal and and autonomous agentic AI workflows. This is available in teams, Slack or any browser to turn natural language requests into governed multi system execution for nearly 200 million employees so far. We launched midway through Q1 and it’s already closed many deals above a million. You’ll also see some exciting new experiences and and we will announce this in a big way at Financial Analyst Day in Vegas. As more employees converge on our conversational experience, ServiceNow will deliver intelligence from any source putting AI to work for people. The fifth area is Workflow Data fabric. We all know that AI is only as valuable as the data itself. Enterprises are frantically organizing and cleansing data from Countless disparate sources. Workflow data fabric connects data across systems. It adds business context via a unified data catalog and applies policy based governance controls. With ServiceNow, AI understands how an enterprise actually works so they can take trusted action. I explain the five areas for one good reason. All of them have the capacity to to eclipse the size and growth trajectory of ServiceNow as it stands today itself. And for years, we’ve strengthened a common platform architecture for these businesses and for others we’re incubating to harness enterprise AI. ServiceNow has thousands of system connections, a live knowledge graph and real enterprise context. We accommodate any model aligned to customers, policies, permissions and rules. And every decision. And ServiceNow is auditable, end to end. Our platform delivers workflow execution across it, hr, CRM and security. It’s not recommendations, it’s outcomes that matter. Our AI control tower provides real time visibility across every agent and every workflow. Because governance has to be foundational, not retrofitted. This architecture is a big reason why we recently announced the entire ServiceNow portfolio is AI. Native AI, data security and governance are now built into every product and package, not a separate purchase. This is a deliberate break from from sidecar AI. We’re not bolting intelligence onto disconnected systems. We’re combining context with execution on a single platform. ServiceNow’s context engine is the differentiated capability. Here it learns from every decision ever made in a company, grounding each AI agent action in live context, approval chains, asset dependencies, identity relationships and business rules. We’ve now trained over 95 billion annual workflows and more than 7 trillion transactions. And our 22 years at the center of the world’s most sophisticated enterprises is really showing up because it brings unmatched intelligence to every decision. And this compounds with every workflow we run, making the platform smarter over time. In fact, in every millisecond, for example, it knows which asset is tied to a compliance process, which approval chain applies to a given cost threshold, and which vendor’s history should inform how a request should be handled. So when people ask, what’s the difference between ServiceNow AI and the foundation models? And you can boil it down to one word, context. I read that one of our customers referred to ServiceNow this way. The control tower is the quarterback. It figures out which agent or LLM to use. Merge that with a quote from the hall of Fame coach Bill Walsh. Chaos is the quarterback’s natural environment, Ladies and gentlemen. There’s plenty of chaos in today’s enterprises. You have hyperscalers, systems of record, foundation models, data lakes, homegrown tools and agents coming at you from everywhere. That’s why our platform is totally open. We integrate with all of them. Because ServiceNow is the only enterprise AI platform that converts that chaos to control, we would not trade positions with anyone. Let me give you a quick overview of a couple of announcements we just recently rolled out. ServiceNow launched autonomous workforce teams of AI specialists with the defined roles that execute enterprise work end to end with built in governance, auditability and human escalation. Our own deployment in ServiceNow is resolving 90% of employee IT requests, with the specialist resolving assigned cases 99% faster than human agents. That’s an AI specialist. In the AI native platform announcement, you might have missed Build Agent which gives us developer openness, another meaningful unlock Developers can build from any integrated developer environment, Claude Code, Cursor, Codex, Windsurf and deploy them directly to ServiceNow. This expands the addressable builder community significantly. Build Agent Skills isn’t just a developer tool, it’s the on ramp to an ecosystem where every custom agent is automatically governed, data connected and workflow integrated from the moment it deploys. With Enterprise Service Management foundation we are expanding our opportunity in the mid market as well with deployment in weeks not months. This is the direct expansion of our addressable customer base. One early example is Robinhood. Robinhood is deflecting 70% of employee requests before human intervention. They’ve already eliminated 2200 hours of manual effort monthly and the success just continues. I know many are interested in the progress of our hybrid business model, especially with regard to consumption pricing. You’ll be happy to know that 50% of net new business now comes from a non seat based pricing model including tokens and other assets such as infrastructure, hardware and connectors. Our hybrid pricing model gives customers the best of both worlds, predictable foundational seat licenses combined with usage based scalability. It’s the freedom to scale AI adoption without a friction that the customers love. We continue to see the hockey stick taking shape. One example is British engineering and technology company. 45,000 employees, 50 countries. They’re using ServiceNow autonomous workflows, employee self service and it’s jumped the usability and the outcome by 3x. With 38,000 tickets now deflected, resolution time is down by two entire days. A leading online travel company is using ServiceNow Agentic AI to deliver 11 million autonomous AI resolutions annually. For HR and IT alone, they freed employees to focus on strategic work processes that once took days, now take minutes. The results are transformational. Over 230% ROI, 45,000 hours back to their people and millions saved annually. These and many stories like them validate our hybrid thesis. As the business value emerges, refresh upgrades follows. We’ll have more on this at fad. We really can’t wait. We’re seeing continued meaningful acceleration in the partner ecosystem. There is deep technical collaboration between ServiceNow engineers and OpenAI technical advisors. OpenAI native voice and text models are integrated directly into the ServiceNow AI platform and they’re using us as a gateway into the enterprise. If you think about it, ServiceNow AI specialists are working side by side with Google Gemini AI agents. They’re doing this across 5G networks, retail and IT operations with zero data movement and zero gaps in governance. Claude models are also deeply integrated into ServiceNow AI platform for developers and employees. ServiceNow, NTT, Docomo and StarHub are developing the industry’s first intercarrier autonomous roaming resolution model on the ServiceNow AI platform. ServiceNow and Cohesity announced a partnership to deliver agent resilience by combining ServiceNow’s AI agent control tower with Cohesity’s immutable point in time data recovery. ServiceNow and Carahsoft expanded our partnership to extend ServiceNow AI platform availability. This opens all Carahsoft’s commercial channels in addition to its established government network of 10,000 plus resellers. There’s so much to talk about. I want to leave some for Q and A, but a colleague today reminded me of something Warren Buffett often quotes from Benjamin Graham. In the short run, markets are voting machines and right now uncertainty is winning the vote. But don’t worry, in the long run they are weighing machines. And I’ll tell you, I’ll get on that scale with that ServiceNow brand on my chest. Any day we look at it, we studied it, we dare anyone to bring a better solution to the market than ServiceNow. We are the rules and the rails of business. When you’re faced with these results, trust what you see. You have every reason to believe your own eyes. Don’t fall for the parlor trick that one touch button can replace 22 years of excellence. This is not a company that shrinks from challenges. It rises to every opportunity. To all our shareholders, thank you for your continued belief in ServiceNow. We will never let you down. I’ll leave you with this. There’s a perfect correlation between Enterprise AI from any source and ServiceNow’s expansion. We’re letting it rip. Whether it’s built or bought, ServiceNow will unlock more value out of every dollar spent on AI in the enterprise. That’s a guarantee. There are a lot of things AI can do for your business and we love them all. There’s also a lot of things AI can do to your business and we want to protect you. We have comported this in how we’ve composed this company organically and with the integration of Moveworks, VESA and Armis. Our platform has gone from land and expand to control and compound AI that thinks workflows that act all production grade enterprise scaled ServiceNow is the AI defining enterprise software company of the 21st century. We’re just getting started. I’ll hand things over to our President, Chief Financial Officer Gina Mastantuno. Gina, over to you.
Gina Mastantuno (President and Chief Financial Officer)
Thank you Bill Q1 was another quarter of outstanding execution. The team delivered strong results beating the high end of our guidance across all top line and profitability metrics. Now ASSIST continues to see incredible demand which has had a nice pull effect and driven out performances across emerging products like AI Control Tower and Raptor DB Pro. Q1 subscription revenues are 3.671 billion, growing 19% year over year in constant currency and above the high end of our guidance. This includes 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. RPO ended the quarter at approximately 27.7 billion representing 23.5% year over year constant currency growth. Current RPO was 12.64 billion representing 21% year over year constant currency growth a 100 basis point beat versus our guidance. Across our workflows we saw broad based demand. Technology workflows had 33 deals over a million including 5 over 5 million. ServiceOps and ITAM were each in 17 of our top 20 deals and security and risk was in 15. CRM and industry workflows were in 16 of our top 20 deals with 16 over a million driven by strength in CPQ and Sales and Order management. Core business workflows had 13 deals in the top 20 with 12 over a million and creative workflows had 16 deals in the top 20 with 11 over a million dollars. From an industry perspective, Transportation and Logistics continued to lead the way with net new ACV growing over 280% year over year. Financial services posted impressive growth surpassing 65%, followed by energy and utilities growing at 45% year over year. Telecom and Media also delivered robust growth in the quarter and US public sector outperformed in Q1, closing 10 deals over a million dollars. Our renewal rate inclusive of Moveworks was a strong 97% in the quarter. We ended Q1 with 630 customers generating over 5 million in ACV. Furthermore, we had 5 more customers cross the 50 million threshold versus last year. We closed 16 deals greater than 5 million in net new ACV in the quarter, including 5 deals over 10 million. The power of our Better Together platform model was evident as 17 of our top 20 deals included seven or more products. Our strategic focus on landing the right new customers also continues to see success. New Logo ACV growth accelerated to over 50% year over year in Q1 which included our largest net New Logo deal ever at over 15 million. Now assist continues to outperform expectations, putting it on a trajectory to exceed our billion dollar target for 2026 in Q1 deals including three or more NowAssist products grew nearly 70% year over year including 36 deals with five or more products. The …
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