--- title: "Post-earnings plunge drags down SaaS sector! ServiceNow results meet expectations, but Middle East conflict weighs on performance and AI disruption concerns linger" type: "News" locale: "en" url: "https://longbridge.com/en/news/283732100.md" description: "ServiceNow shares fell more than 13% in after-hours trading following the release of its first-quarter 2026 results. Although revenue and subscription revenue both grew 22% year over year, meeting expectations, the Middle East conflict caused delays in major orders, dampening investor sentiment. Additionally, ServiceNow completed a $7.75 billion acquisition of Armis, which is expected to impact subscription revenue growth rates. Following this earnings announcement, the broader SaaS sector declined" datetime: "2026-04-22T22:33:16.000Z" locales: - [zh-CN](https://longbridge.com/zh-CN/news/283732100.md) - [en](https://longbridge.com/en/news/283732100.md) - [zh-HK](https://longbridge.com/zh-HK/news/283732100.md) --- # Post-earnings plunge drags down SaaS sector! ServiceNow results meet expectations, but Middle East conflict weighs on performance and AI disruption concerns linger After ServiceNow announced its first-quarter 2026 results, its stock price fell more than 13% in after-hours trading. **Although company management stated that performance "again exceeded the upper bound of guidance," the ongoing Middle East conflict delayed the closing of several large orders, compounded by Wall Street's persistent skepticism about the prospects of enterprise software in the AI era, causing investor sentiment to cool significantly.** The company's financial report showed that **total revenue for the quarter was $3.77 billion and subscription revenue was $3.671 billion, both representing a 22% year-over-year increase, roughly in line with the average analyst estimates compiled by Bloomberg.** In its earnings statement, ServiceNow noted that **several large on-premise orders in the Middle East region were delayed due to ongoing local conflicts, dragging down subscription revenue growth by approximately 75 basis points for the quarter; without this impact, growth could have approached 23%.** Simultaneously, ServiceNow completed its acquisition of cybersecurity startup Armis on April 20, with a transaction value of $7.75 billion, marking the largest M&A deal in the company's history. This transaction is expected to contribute approximately 125 basis points to full-year subscription revenue growth, while compressing full-year operating margins by about 75 basis points. Following the earnings release, ServiceNow shares fell 13.55% in after-hours trading, dragging down the entire SaaS sector. (Salesforce -5.2%, Atlassian -6.6%, HubSpot -5.5%, Workday -4.6%, MongoDB -1.9%, Snowflake -2.3%, Cloudflare -1.2%, Microsoft -1.5%) ## Revenue and core growth metrics met expectations **ServiceNow reported total revenue of $3.77 billion for the first quarter, up 22% from $3.088 billion in the same period last year, representing a 19% increase at constant currency. Subscription revenue reached $3.771 billion, also achieving a 22% year-over-year increase.** On a non-GAAP basis, operating profit was $1.199 billion, corresponding to an operating margin of 32%, a slight increase from 31% in the same period last year. On a GAAP basis, operating profit was $503 million, with an operating margin of 13.5%. Free cash flow was $1.665 billion, with a free cash flow margin of 44%. GAAP net income was $469 million, or $0.45 per diluted share; non-GAAP net income was $1.012 billion, or $0.97 per diluted share. **As of the end of the first quarter, current remaining performance obligations (cRPO) stood at $12.64 billion, a 22.5% year-over-year increase, or 21% at constant currency; total remaining performance obligations (RPO) were $27.7 billion, up 25% year-over-year.** This quarter saw 16 new large deals with an annual contract value (ACV) exceeding $5 million, nearly an 80% year-over-year increase; the total number of customers with an ACV exceeding $5 million reached 630, up approximately 22% year-over-year. ## Second-quarter guidance slightly beat expectations, full-year guidance raised **ServiceNow provided a second-quarter 2026 subscription revenue guidance range of $3.815 billion to $3.82 billion, representing a year-over-year increase of approximately 22.5%, higher than the average analyst expectation of $3.75 billion.** Full-year subscription revenue guidance was raised to $15.735 billion to $15.775 billion, corresponding to a year-over-year increase of 22% to 22.5%, with growth at constant currency on a non-GAAP basis ranging from 20.5% to 21%. The company expects full-year non-GAAP operating margins to be 31.5% and free cash flow margins to be 35%. ## Armis acquisition completed, betting on unified security platform ServiceNow completed two acquisitions this quarter, aiming to build end-to-end security capabilities covering the entire enterprise technology stack. In addition to the Armis deal closed on April 20, the company also completed the acquisition of identity security firm Veza on March 2, which focuses on access control for enterprise data, applications, and AI agents. **Regarding the Armis acquisition, the company expects it to contribute approximately 125 basis points to full-year 2026 subscription revenue growth, while simultaneously dragging down full-year subscription gross margin, operating margin, and free cash flow margin by approximately 25, 75, and 200 basis points, respectively.** ServiceNow stated that the near-term margin pressure resulting from integration is expected to be gradually absorbed in fiscal year 2027 as platform leverage effects are released. ## Management emphasizes AI strategy progress, but fails to allay Wall Street concerns In terms of AI business, within the company's AI assistant product Now Assist, the number of customers with an annual ACV exceeding $1 million increased by more than 130% year-over-year, which management views as a significant signal of accelerating monetization capabilities for platform AI. **Despite executives continuously emphasizing progress in AI strategy, ServiceNow shares have fallen approximately 33% year-to-date so far, similar to the trends of peers Salesforce and Workday.** Deutsche Bank analyst Brad Zelnick wrote in a research report prior to the earnings release: "We believe that neither the results themselves nor management's comments can easily eliminate market concerns regarding mid-term AI disruption risks." ServiceNow Chairman and CEO Bill McDermott stated in the earnings release that customers are viewing the company's platform as an "AI control tower for business transformation" and emphasized that AI business growth "has far exceeded the company's own expectations." The company will host its 2026 Financial Analyst Day in Las Vegas on May 4, where the executive team will provide detailed updates on financial outlooks and the latest developments in the AI platform. Risk warnings and disclaimer Markets involve risk; investment requires caution. This article does not constitute personal investment advice and does not take into account the specific investment objectives, financial situations, or needs of individual users. Users should consider whether any opinions, views, or conclusions herein align with their specific circumstances. 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