ServiceNow (NOW) Q1 FY26 earnings call: guidance and Q&A

Clarify the impact of Middle East deal deferrals on Q1 results and the methodology for measuring Now Assist AI revenue, especially with new pricing tiers.

Management confirmed Q1 was a beat and raise, with the Middle East impact being a minor 75 basis point headwind from on-prem deals, some of which have already closed in Q2. The full-year guidance was not reduced. The methodology for measuring AI revenue remains consistent, focusing only on incremental AI contributions. The 2026 Now Assist target was raised from $1 billion to $1.5 billion.

“We had a goal to be $1 billion on our AI commit this year, as you know. And I think we might have understated that a little bit. We're already talking about $1.5 billion now, and it's on a run.”

asked by Mark Murphy · answered by William McDermott

How does ServiceNow differentiate its agentic orchestration amidst a competitive and noisy market?

ServiceNow's differentiation stems from its 22 years of accumulated data, 95 billion workflows, and 7 trillion transactions, which provide unmatched context through its Context Engine. The company focuses on delivering outcome-driven solutions and autonomous workforce capabilities, handling the complexities of security, compliance, and control, rather than just orchestration.

“The context and the context engine that we have built to be that AI Control Tower for business reinvention, managing the humans and the agents and coalescing that in this unbelievable platform is what gives us the context advantage that nobody can match.”

asked by Brad Zelnick · answered by William McDermott

Is there a risk that customers negotiate down the pricing of classic ServiceNow stack components to free up budget for new AI products?

Management stated that innovation on the platform reinvigorates the core, and they are not experiencing customers negotiating down core product pricing. The core IT system of record is seen as more critical than ever due to AI complexity, and AI-native platform upgrades benefit existing customers without additional cost for core features.

“One thing that I've learned is when you innovate on the platform, whatever the platform is, it reinvigorates the core. And when you do smart M&A, it also doubles down, reinvigorates the core.”

asked by Gabriela Borges · answered by William McDermott

Elaborate on the long-term strategy and vision for Autonomous Workforce, how it complements Now Assist, and the pricing model for the value it brings.

The vision for Autonomous Workforce is to provide end-to-end resolution for various functions, exemplified by Level 1 support AI specialists resolving issues in 20 minutes compared to two days for humans. This expands the total addressable market and is monetized through the Assist pricing structure, which is part of the AI native pricing across all product tiers. Internal use has already shown $0.5 billion in productivity gains.

“What we're doing is taking that pain and the burden away from human and putting that into this Level 1 support specialist, AI specialist, which will now understand the intent and the question and figure out how to resolve it based on the exact learning they've had for many of the data we provide underneath the covers and then get that resolution in a very short amount of time.”

asked by Peter Weed · answered by Amit Zavery

Address investor concerns regarding the organic nature of Q1 beat, the full-year guidance not significantly increasing despite AI traction, and how ServiceNow compares to 'AI labs' in capturing the AI opportunity.

Management clarified that Veza and Pyramid contributions were tiny, making the Q1 beat organic. The full-year guidance was held and increased with Armis, despite geopolitical headwinds. The Now Assist target was raised to $1.5 billion. They emphasized predictable growth, expanding margins (Rule of 56+ aiming for 60+), and a commitment to reducing stock-based compensation. AI spend is seen as incremental, not replacing ServiceNow spend, and the company's strategic M&A focuses on innovation, not just revenue.

“We didn't buy anything with a whole bunch of revenue, okay? We didn't buy what's been on the market for 10 or 15 or 20 years to plug a revenue gap. We bought companies that are adding to the AI Control Tower for business reinvention.”

asked by Keith Weiss · answered by William McDermott

Characterize the current enterprise spending environment, particularly concerning potential 'AI anxiety' leading to hesitation in larger purchases.

Customers are excited but somewhat confused about AI. ServiceNow positions itself as an open control tower that clarifies the role of various AI models and systems in a heterogeneous enterprise environment. Management highlighted strong deal wins (16 deals >$5M, 5 >$10M, largest new logo >$15M) as evidence of continued customer spending and confidence in ServiceNow's value proposition.

“The environment is very excited about AI. These language model companies are great companies, are very exciting. So they're very excited about AI. The problem is they don't exactly know what to do. So they're somewhat confused.”

asked by Aleksandr Zukin · answered by William McDermott

Discuss customer feedback on recent acquisitions, the time to ramp new offerings, and Gina's approach to guiding for these new pieces.

Customers are highly positive about the acquisitions, with Moveworks already quintupling the EmployeeWorks business. Veza and Armis were strategic buys for innovation, not immediate revenue. The AI Control Tower vision is resonating strongly. Gina confirmed a prudent approach to guidance for new acquisitions in 2026, with significant upside potential for 2027 and beyond as integration ramps up.

“The company and the customer loves the acquisitions that we did, loves it. ServiceNow has a great relationship with our customers, and they count on us for innovation.”

asked by Michael Turrin · answered by William McDermott