ServiceNow Posts 22% 1Q Revenue Growth, But Says Armis Deal Will Weigh on Margins
NOW
Published on 04/22/2026 at 05:12 pm EDT
By Elias Schisgall
ServiceNow posted 22% revenue growth in the first quarter but projected the integration of Armis weighing on its margins this year.
The cloud-based software company said Wednesday that the acquisition of Armis, a cybersecurity startup, will result in a roughly 75 basis point headwind to its operating margin for the full year, as well as a roughly 125 basis point headwind to its operating margin in the second quarter.
It is also projecting 25 basis point headwind to full-year subscription gross margin and approximately a 200 basis point headwind to free cash flow margins for the year.
The company guided for full-year subscription revenue between $15.74 billion and $15.78 billion.
That projection fell short of the $15.98 billion Wall Street analysts are expecting, according to FactSet.
"While we will see some near-term headwinds to margins as we integrate the business in FY 2026, strong AI efficiencies internally from Now on Now and our underlying platform leverage are expected to normalize our operating and free cash flow margin expansion trajectories in FY 2027," the company said.
Shares of ServiceNow tumbled 12% in after-hours trading to $90.20. The stock closed up 2.9% at $103.07, down 33% this year.
For the current second quarter, ServiceNow is expecting subscription revenue to grow to roughly $3.82 billion, with current remaining performance obligations expected to rise 19%.
Analysts are expecting $3.86 billion in revenue.
"The early close of our Armis acquisition meaningfully expands our TAM and accelerates our subscription revenue growth trajectory," Chief Financial Officer Gina Mastantuono said.
ServiceNow recorded a first-quarter profit of $469 million, or 45 cents a share, compared with a profit of $460 million, or 44 cents a share, a year earlier.
On an adjusted basis, ServiceNow posted earnings of 97 cents a share, in line with the expectations of analysts polled by FactSet.
Revenue rose to $3.77 billion from $3.09 billion, ahead of analysts' projections of $3.75 billion.
"As new technologies create both opportunity and risk, our two decades of engineering combined with deep business context enable us to orchestrate and secure the agentic enterprise," ServiceNow Chief Executive Officer Bill McDermott said. "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."
The company ended the quarter with $12.64 billion in current remaining performance obligations, up nearly 23% year-over-year.
Subscription revenues rose 22% to $3.67 billion. Subscription revenue growth faced a 75 basis point headwind from the delayed closings of several Middle East deals, which were disrupted by the war in Iran, the company said.
ServiceNow's outlook "reflects a prudent assessment of those geopolitical headwinds on deal timing," the company said.
Write to Elias Schisgall at [email protected]
(END) Dow Jones Newswires
04-22-26 1711ET