What's happening
ServiceNow reported Q1 2026 total revenues of $3.77 billion, up 22% year-over-year, with subscription revenues reaching $3.671 billion, also up 22% year-over-year. The company delivered non-GAAP earnings per share of $0.97 per diluted share, beating analyst expectations. Current remaining performance obligations reached $12.64 billion, up 22.5% year-over-year, while total remaining performance obligations grew to $27.7 billion, up 25% year-over-year.
ServiceNow raised its full-year 2026 subscription revenue guidance to $15.735 billion to $15.775 billion, representing 22% to 22.5% year-over-year growth. The company reported 16 transactions over $5 million in net new annual contract value, representing nearly 80% year-over-year growth, and now serves 630 customers with more than $5 million in annual contract value, approximately 22% year-over-year growth. Despite the strong results, shares fell 12% in after-hours trading to $89.52 from $103.07.
Why it matters for markets
ServiceNow's ability to maintain 22% revenue growth while expanding margins through AI-driven productivity demonstrates how enterprise software companies can leverage artificial intelligence to improve operational efficiency. CEO Bill McDermott emphasized that AI enables the company to maintain flat headcount despite natural attrition, allowing ServiceNow to capture efficiencies while expanding free cash flow margins. The company's current remaining performance obligations of $12.64 billion provide revenue visibility, while the 25% growth in total remaining performance obligations to $27.7 billion indicates strong future demand.
The 12% after-hours stock decline despite beating estimates and raising guidance suggests investor concerns about valuation or growth sustainability. With ServiceNow trading at a price-to-earnings ratio of 61.7 and a market capitalization of $107.81 billion, the stock's reaction indicates high expectations may be difficult to exceed consistently. The company's share repurchase program, which bought back 20.1 million shares in Q1 2026, demonstrates capital allocation discipline amid the growth investments.
The nearly 80% year-over-year growth in large transactions over $5 million in net new annual contract value indicates ServiceNow's success in landing enterprise deals, while the 22% growth in customers with more than $5 million in annual contract value shows expansion within its existing base. These metrics suggest the company is successfully scaling its AI-enhanced platform across large enterprise customers.
Sectors and assets to watch
Enterprise software companies leveraging AI for productivity gains represent a key theme, with ServiceNow's results providing a benchmark for how artificial intelligence can drive margin expansion while maintaining growth. The company's success in workflow automation and IT service management positions it within the broader digital transformation market, where organizations seek to streamline operations through AI-powered platforms.
ServiceNow's performance may influence investor sentiment toward other cloud-based enterprise software providers, particularly those integrating AI capabilities into their platforms. The company's ability to grow large customer relationships, with 630 customers generating more than $5 million in annual contract value, demonstrates the scalability of enterprise AI solutions and may signal broader adoption trends across the technology sector.
What to watch next
Monitor ServiceNow's quarterly progress on AI-driven productivity metrics and whether the company can sustain its 22% revenue growth rate while expanding margins through workforce efficiency gains. Key indicators include the trajectory of remaining performance obligations growth, the pace of large enterprise deal wins over $5 million in annual contract value, and management's ability to deliver on the raised full-year subscription revenue guidance of $15.735-$15.775 billion.