New York, April 23, 2026, 2:04 PM EDT.
- ServiceNow stock slid roughly 18.7% in afternoon trading following its latest quarterly report.
- First-quarter numbers came in ahead of estimates, and the company also lifted its subscription revenue outlook for 2026.
- Stronger guidance couldn’t offset concerns about delayed government contracts in the Middle East and unease over AI, investors said.
ServiceNow dropped roughly 18.7% Thursday despite topping first-quarter expectations and bumping up its full-year subscription revenue forecast. Investors homed in on postponed Middle East contracts and renewed questions about the actual impact of artificial intelligence on software. The stock last traded at $83.77 in U.S. afternoon hours.
The decline isn’t just about ServiceNow. As one of the first major cloud software names to release results this quarter, ServiceNow’s report has become a litmus test for investors watching to see if AI-fueled demand can calm nerves around Anthropic and OpenAI threatening established software models.
Before the numbers dropped, nerves were already showing. According to a Reuters piece published Wednesday, J.P. Morgan flagged ServiceNow as a common hedge-fund short, pegging short interest at roughly 2.9%. That level hinted plenty of investors had positioned themselves for potential downside in the group.
ServiceNow, based in Santa Clara, California, posted first-quarter subscription revenue of $3.671 billion, up 22% — that’s the steady stream of fees clients pay for its software. Total revenue landed at $3.77 billion; adjusted earnings came in at 97 cents a share. Both numbers topped Wall Street’s estimates. The company also bumped its 2026 subscription revenue outlook, now expecting $15.735 billion to $15.775 billion, compared to the previous range of $15.53 billion to $15.57 billion.
Timing proved to be the stumbling block. ServiceNow reported that holdups with several sizable government contracts for on-premises software deployments in the Middle East shaved about 75 basis points, or 0.75 percentage point, from first-quarter subscription growth. “We don’t know when these conflicts will get sorted out, but we continue to work with these customers,” Chief Operating Officer Amit Zavery told Reuters. ServiceNow Investor Relations
ServiceNow reported steady core demand and landed 16 contracts each topping $5 million a year this quarter. The company saw its base of customers spending at least $1 million annually on Now Assist AI products jump more than 130% from a year ago. “AI growth was far exceeding even our own expectations,” Chief Executive Bill McDermott said. ServiceNow Investor Relations
One more thing to watch: ServiceNow expects the Armis deal, finalized April 20, to shave roughly 2 percentage points off its full-year free cash flow margin, and cut second-quarter operating margin by about 1.25 points. The company is counting on the acquisition to support a bigger security play.
ServiceNow is pushing back, saying its business model is shifting. Zavery noted that over half of new deals now rely on usage-based pricing—customers are billed according to how much they actually use the platform, rather than the number of employee licenses—which could limit the company’s vulnerability if AI alters software buying habits. As for pricing, McDermott said there’s been no real downward pressure on ServiceNow’s main offerings.
Software stocks took a hit. IBM slid 10.3% after reporting its numbers. Microsoft was down 2.7%, Adobe off by 3%. Chip names, however, headed higher. For UBS strategist Kiran Ganesh, that tech divergence could be “a major driver for markets” looking ahead. Reuters
No surprise then that even a beat-and-raise hasn’t soothed investors’ anxiety. “Nothing software companies report this quarter is likely to refute that long-term bear case” surrounding AI, said Joe Maginot, portfolio manager at Madison Investments. ServiceNow’s strong results didn’t move the needle. Reuters
