ServiceNow Q1 2026 earnings: stock drops 17% on margin fears

2 min readUpdated April 23, 2026

ServiceNow $NOW stock fell 17% after the company reported first-quarter 2026 results that beat guidance across all top-line and profitability metrics, but flagged delayed deal closings in the Middle East and near-term margin pressure tied to its acquisition of cybersecurity company Armis.

Subscription revenues for the quarter ended March 31 reached $3.67 billion, up 22% year over year, according to ServiceNow. Total revenues came in at $3.77 billion, also 22% higher than a year earlier. Current remaining performance obligations — contract revenue expected to be recognized in the next 12 months — grew 22.5% to $12.64 billion.

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The Armis acquisition, which closed April 20, is expected to add about 125 basis points to Q2 and full-year subscription revenue growth but also create headwinds of about 75 basis points to full-year operating margin, about 25 basis points to full-year subscription gross margin, and about 200 basis points to full-year free cash flow margin, the company said. For Q2 alone, Armis is expected to weigh on operating margin by about 125 basis points.

For the full year, ServiceNow raised its subscription revenue outlook to between $15.74 billion and $15.78 billion, representing 22% to 22.5% growth. It guided for a full-year non-GAAP operating margin of 31.5% and a free cash flow margin of 35%.

Non-GAAP operating margin for Q1 came in at 32%, up from 31% a year earlier, while GAAP gross margin declined to 75% from 79% in the same period. The Armis-related integration costs and amortization were cited as contributors to the margin compression.

"ServiceNow's first quarter performance beat the high end of our guidance once again," CEO Bill McDermott said in a statement, pointing to the company's AI platform as central to customer demand.

Despite the selloff, TipRanks noted that positive long-term ratings held firm across most of the analyst community even as price targets were revised lower. At DA Davidson, Gil Luria brought his price target down to $190 from $220, holding his Buy rating, while Piper Sandler's Rob Owens moved his target to $140 from $200 and likewise kept a Buy. The most pessimistic call came from KeyBanc, where Jackson Ader trimmed his target to $85 from $115 and stood by a Sell rating, citing Middle East deal delays, a narrower-than-typical cRPO beat, and margin drag from recent acquisitions among his concerns.

ServiceNow also closed its acquisition of identity security company Veza on March 2, extending its security capabilities alongside the Armis deal, the company said.

ServiceNow's stock posted its worst day ever after beating earnings but warning on margins

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