SANTA CLARA, California, April 22, 2026, 14:07 PDT
ServiceNow dropped 14% in after-hours action Wednesday. The enterprise software firm blamed the Middle East conflict for pushing back a handful of major deals, taking some wind out of what was otherwise a solid quarter. Still, the company raised its full-year subscription revenue forecast.
ServiceNow’s numbers hit early in a high-stress earnings cycle for software, so Wall Street is watching closely. Investors want proof that AI is padding the top line for legacy names—rather than cannibalizing the core jobs their software is supposed to do.
Earlier on Wednesday, J.P. Morgan analysts flagged ServiceNow as a hedge fund short favorite, noting short interest near 2.9%. The stock had dropped around 35% this year heading into its earnings report. Short interest tracks wagers against a stock.
ServiceNow posted a 22% jump in first-quarter subscription revenue, reaching $3.671 billion. Total revenue matched that pace, up 22% to $3.770 billion. The company’s current remaining performance obligations—which reflect contracted revenue due within a year—climbed 22.5% to $12.64 billion.
The company bumped up its full-year 2026 subscription revenue guidance, now expecting between $15.735 billion and $15.775 billion—previously it had projected $15.53 billion to $15.57 billion. For the second quarter, subscription revenue is set to land between $3.815 billion and $3.820 billion.
But geopolitics left its mark on the quarter. ServiceNow reported subscription revenue growth dragged down by about 75 basis points, blaming delayed closings for several major on-premises deals in the Middle East. (A basis point equals one-hundredth of a percent.) The conflict also spilled into energy: Brent crude finished $3.43 higher at $101.91 a barrel, U.S. crude tacked on $3.29 to $92.96, both buoyed by fuel inventory draws and reports that gunfire struck container ships in the Strait of Hormuz.
Bill McDermott, the CEO, brushed aside concerns and highlighted growing appetite for ServiceNow’s AI lineup. “The results speak a lot louder than the words,” he told Business Insider, noting the company’s 2026 sales goal for AI software now sits at a minimum of $1.5 billion, up from $1 billion. Business Insider
McDermott brushed aside talk that AI models from companies like OpenAI and Anthropic might supplant enterprise platforms, labeling certain products as “parlor tricks.” He maintained that relying directly on these models could leave corporate clients exposed to unpredictable usage-driven costs. Business Insider
“I’m not worried about the narrative,” ServiceNow COO Amit Zavery told Reuters, pointing out that over half of the company’s new business taps non-seat-based pricing—revenue now hinges more on how much clients use the platform, not just on user licenses. ServiceNow has inked partnerships with Anthropic and OpenAI, even as it faces pressure from Salesforce and a wave of AI-native rivals angling for their share of the software market. Reuters
The danger: even the higher outlook might fall short. ServiceNow wrapped up its $7.75 billion all-cash buy of cybersecurity player Armis on April 20. The company flagged that the acquisition could shave roughly 200 basis points from fiscal 2026 free cash flow margin, and cut second-quarter operating margin by about 125 basis points.
Joe Maginot, who manages portfolios at Madison Investments, told Reuters there’s simply “nothing” software firms can report this quarter or even next that would really put to rest the persistent, longer-term bearish arguments swirling around AI. He framed it as an “existential question” for the industry, one tied to fundamental changes that may play out across years. Reuters
At this stage, ServiceNow brings growth, a higher AI revenue goal, plus more heft in security. But the stock’s reaction tells the story—investors are hungry for clearer results: not as much deal drag tied to conflicts, less hand-wringing over margins after acquisitions, and solid signs that AI means customers are paying more, not just pausing to reassess their software setups.
