Q1 2026 Earnings — Reported April 22, 2026 · Beat Every Metric · Stock −17% · Worst Single-Day Drop in History
Revenue +22% to $3.77B · Now Assist ACV +130% · $7.75B Armis Deal · Stock −41% YTD
ServiceNow delivered a near-flawless Q1 2026 operationally — subscription revenue beat, cRPO above guidance by 100bps, non-GAAP operating margin beat, free cash flow margin of 44%, and Now Assist (AI suite) customers spending $1M+ ACV grew 130% YoY. Then the stock collapsed 17% — the worst single-day loss in company history — as the market absorbed the $7.75B Armis acquisition, a $4B term loan, moderating Q2 constant-currency guidance, and a macro repricing of enterprise SaaS multiples. By late April, NOW traded at ~$90, down 41% YTD and 57% from its $211 52-week high.
Key Metrics — Q1 2026 Actuals (Official 8-K SEC Filing)
Subscription Revenue
$3.671B
+22% YoY (+19% CC)
Total Revenue
$3.770B
+22% YoY (+19% CC)
cRPO (Current RPO)
$12.64B
+22.5% YoY (+21% CC)
Non-GAAP Operating Margin
32%
Beat 31.5% guidance
Non-GAAP Diluted EPS
$0.97
Beat $0.80 est. by 21%
Free Cash Flow Margin
44%
$1.67B FCF
Now Assist $1M+ ACV Growth
+130% YoY
Customers spending $1M+ in AI ACV
Total RPO Backlog
$27.7B
+25% YoY (+23.5% CC) · record
Net New ACV Transactions $1M+
244
+~40% YoY · enterprise AI deals
Armis Acquisition
$7.75B
Cybersecurity AI · $4B term loan
Beat / Miss Matrix
Operational Beats
Non-GAAP EPSEst. $0.80$0.97 (+21.3%)
Subscription RevenueGuide $3,650–3,655M$3,671M (+16M above)
cRPO Growth (CC)Guide 20% CC21% CC (+100bps)
Non-GAAP Op. MarginGuide 31.5%32% (+50bps)
Free Cash Flow MarginFY guide 36%44% in Q1 · above guide
Now Assist $1M+ ACV—+130% YoY · 244 deals $1M+
Market Concerns (Caused −17%)
Armis acquisition price—$7.75B · $4B debt · dilution
Q2 CC subscription growth~21% CC expected~19.5% CC guided
GAAP Net Income / EPSEst. higher$469M · GAAP EPS $0.45 flat YoY
GAAP Profit MarginQ1 2025: 15%12% (−3pp YoY)
Stock price reactionBeat expected−17% · worst day in history
YTD performance—−41% YTD · −57% from $211 high
P&L Summary — Q1 2026 (Official 8-K SEC Filing)
Select Financial Results — Three Months Ended March 31, 2026
Subscription Revenue$3,671M$3,008M+22%
Professional Services Revenue$99M—Small %
Total Revenue$3,770M$3,087M+22%
Non-GAAP Subscription Gross Margin81.5%—High-quality
Non-GAAP Operating Income$1,206M—32% margin
Non-GAAP Net Income$1,012M—$0.97 diluted EPS
GAAP Net Income$469M$460M+2% YoY
GAAP Diluted EPS$0.45$0.45Flat YoY
GAAP Profit Margin12%15%−3pp
Free Cash Flow$1,670M—44% FCF margin
Shares Repurchased (Q1)20.2M shares—$2.2B · $4.2B remaining
cRPO (Current RPO)$12,640M$10,320M+22.5%
Total RPO$27,700M$22,160M+25%
Net New ACV (deals >$1M)244 deals~175+~40% YoY
Renewal Rate97%97%6th consec. qtr
AI Platform Detail & CEO Quote
Now Assist AI & Agentic Platform
Now Assist $1M+ ACV customers+130% YoY
Net new ACV deals $1M+244 (+~40% YoY)
Customers >$5M ACV630 (+22% YoY)
Avg ACV/customer ($5M+ tier)$14.9M per customer
Platform positioningAI Control Tower · agentic enterprise
Model agnosticismAny model, cloud, interface, data
Renewal rate97% · 6th consecutive quarter
M&A Activity — Armis, Moveworks, Veza
Armis Security (acquired Q1 2026)$7.75B · cybersecurity AI platform
Armis funding$4B unsecured term loan (JPMorgan)
Moveworks (acquired 2025/2026)AI employee experience
Veza (acquired)Identity governance + access mgmt.
Addressable market (TAM)$600B+ enterprise reinvention
Rule of 55+Revenue growth + FCF margin >55%
Buyback remaining$4.2B authorized
"ServiceNow's first quarter performance beat the high end of our guidance once again. Since our founding, we've built our platform around the work customers need to accomplish. Today, they rely on ServiceNow to be their AI control tower for business reinvention. Customers trust our platform because we integrate with any model, cloud, interface, data, and system they choose to deploy. With this foundation, our AI growth is far exceeding even our own expectations, reinforcing our position as one of the fastest growing enterprise software companies ever."
Bill McDermott, Chairman & CEO · Q1 2026 Earnings Call, April 22, 2026
Q2 & FY2026 Guidance — Raised Post Q1
Management Guidance — Updated April 22, 2026
FY2026 Sub. Revenue Midpoint
$15,755M
Raised +$185M
FY2026 Sub. Revenue Growth
22–22.5%
GAAP reported
FY2026 Non-GAAP Op. Margin
32%
Maintained
FY2026 FCF Margin (Non-GAAP)
36%
Maintained
Q2 2026 Sub. Revenue
$3,815–3,820M
+22% YoY
Q2 cRPO Growth (CC)
~19.5% CC
Deceleration
Now Assist AI ACV growth
+130% YoY ✓
Q1 achieved
Armis integration impact
$4B debt
Cost headwind
Positives & Concerns
Positives
▲Now Assist AI customers spending $1M+ ACV grew 130% YoY — the fastest growth rate of any enterprise AI product at ServiceNow's scale. 244 net new ACV transactions exceeded $1 million — up ~40% YoY — demonstrating that AI monetization has moved from pilot phase to production deployment across enterprise customers.
▲Total RPO of $27.7B (+25% YoY) and cRPO of $12.64B (+22.5%, 100bps above guidance) provide the clearest forward revenue visibility in enterprise SaaS. The 97% renewal rate for the sixth consecutive quarter confirms platform stickiness — once deployed, ServiceNow is rarely replaced.
▲Non-GAAP operating margin of 32% beat the 31.5% guidance and free cash flow margin of 44% — significantly above the 36% FY guide — demonstrates that ServiceNow generates exceptional real cash relative to reported earnings. $1.67B in free cash flow in a single quarter is an exceptional capital generation rate.
▲Full-year 2026 subscription revenue guidance raised to $15,735–15,775M — an increase of approximately $185M from the initial guide — driven by Now Assist AI acceleration. This midpoint raise of $185M on a $15.6B base represents one of the largest absolute guidance raises in SaaS history.
▲Armis Security acquisition ($7.75B) adds AI-powered cybersecurity asset management capabilities that directly expand ServiceNow's platform into a $600B+ TAM. Combined with Moveworks (employee AI) and Veza (identity governance), ServiceNow is building the most complete agentic enterprise AI platform in the market.
Concerns
▼The stock fell 17% on April 23 — the worst single-day decline in ServiceNow's history — despite beating every operational metric. By late April, NOW traded at ~$90, down 41% YTD and 57% from its $211 52-week high. The primary market concern: $7.75B for Armis funded by a $4B term loan creates balance sheet risk and dilution in a rising-rate environment.
▼Q2 constant-currency cRPO guidance of ~19.5% is a deceleration from Q1's 21% CC growth — a critical forward metric that the Street uses to model growth trajectory. For a company priced at a premium multiple, any deceleration signal in RPO growth triggers outsized negative reactions.
▼GAAP net income of $469M (+2% YoY) and GAAP EPS of $0.45 (flat YoY) contrast sharply with the $0.97 non-GAAP EPS — a $0.52 per share gap representing SBC, amortization, and acquisition costs. The gap between GAAP and non-GAAP is widening with acquisitions, making normalized earnings assessment increasingly complex.
▼GAAP profit margin compressed from 15% to 12% YoY — the acquisition program and SBC growth are absorbing a larger share of revenue. As ServiceNow deploys $7.75B+ in M&A capital, integration complexity and one-time costs will continue suppressing GAAP margins through at least H1 2027.
▼The macro environment is creating a broad enterprise SaaS multiple compression — NOW's P/E and EV/Revenue multiples at the $211 high were pricing in a scenario of sustained 20%+ growth at Rule of 55+. With enterprise IT budgets under scrutiny and macro uncertainty elevated, the premium valuation requires sustained execution to re-earn.
Analyst Coverage — Post Q1 2026
Wall Street Ratings — Post April 22–28, 2026
| Firm / Metric | Rating | Note |
|---|
| Simply Wall St consensus | Underwhelmed | PT cut from $246.83 to $200.78 · EPS est. cut from $2.47 to $1.96 |
| Bull case (pre-Armis) | Overweight | RPO $27.7B + Now Assist +130% = Rule of 55+ intact · $150+ PT bull |
| Bear case post-Armis | Neutral / Cautious | $4B debt + CC deceleration + GAAP margin compression = multiple reset |
| NOW at ~$90 (late Apr) | Constructive | At $90 vs $211 peak: EV/Rev ~7x on $15.7B FY guide · historically cheap |
| Rule of 55+ profile | Maintained | Revenue growth + FCF margin >55% — confirmed in Q1 2026 |
| Stock position (Apr 28) | ~$90 | −41% YTD · −57% from $211 high · next earnings Jul 22, 2026 |
Earnings Verdict
Perfect Operational Quarter — Armis Acquisition Reprices the Story
ServiceNow's Q1 2026 was operationally exceptional by every measurable standard: subscription revenue beat, cRPO 100bps above guidance, non-GAAP operating margin beat, 44% FCF margin, 97% renewal rate for the sixth consecutive quarter, Now Assist ACV growing 130%, and full-year guidance raised by $185M. This should have been a catalyst for a rally. Instead, the stock suffered its worst single-day decline in history — a 17% collapse driven by the $7.75B Armis acquisition and the $4B term loan used to finance it, combined with a Q2 constant-currency guidance that implied mild deceleration from Q1's pace. The market's reaction was not about Q1 execution — it was about multiple repricing in the face of large-scale M&A risk and a broad enterprise SaaS de-rating. At ~$90 — down 41% YTD and 57% from the 52-week high of $211 — ServiceNow trades at approximately 7x forward EV/Revenue on $15.7B subscription guidance. For a company maintaining Rule of 55+, 97% renewal rates, 130% AI product growth, and $27.7B RPO, this is historically cheap. The key questions for Q2 and H2: does constant-currency cRPO reaccelerate after Armis integration, and does the $4B debt burden constrain the balance sheet flexibility that has historically funded buybacks and tuck-in M&A? Next earnings July 22, 2026.
Next Earnings
Jul 22, 2026