Summary
ServiceNow reported first quarter fiscal 2026 total revenues of $3.77 billion, up 22.1% from the prior-year quarter. On a constant currency basis, total revenue growth was 19%. Gross profit rose 16.1% to $2.83 billion, while operating income increased 11.5% to $503 million. Net income was $469 million, up 2.0%, and diluted earnings per share came to $0.45, up $0.01. Profitability ratios moved lower. Gross margin was 75.1%, down 3.9 percentage points, and operating margin was 13.3%, down 1.3 percentage points. The company also reported non-GAAP operating margin of 32%, non-GAAP net income of $1,012 million, and non-GAAP diluted earnings per share of $0.97.
Cash generation was steady. Operating cash flow was $1.67 billion, flat versus the prior-year quarter, and capital expenditures were $141 million, down 31.2%. Free cash flow, a non-GAAP measure, was $1,665 million, up 13%. Backlog and deferred revenue continued to expand. Deferred revenue, current portion only, was $8.03 billion, up 19.2%. Remaining performance obligations were $27.70 billion, up 25.3%. Current remaining performance obligations were $12.64 billion, up 22.5%, and represented 46% of RPO. Customer metrics showed momentum: 630 customers had more than $5 million in annual contract value, up approximately 22%; 16 transactions had more than $5 million in net new annual contract value, nearly 80% growth; and Now Assist customers spending over $1 million in annual contract value grew over 130%. The renewal rate was 97%, compared with 98% in the prior-year quarter.
Guidance points to continued growth but also near-term margin pressure. For the second quarter of 2026, ServiceNow guided subscription revenues to $3,815 million to $3,820 million, or 22.5% growth, with cRPO growth of 19% and a non-GAAP operating margin of 26.5%. For full-year 2026, subscription revenues are guided to $15,735 million to $15,775 million, or 22% to 22.5% growth, with a non-GAAP subscription gross margin of 81.5%, a non-GAAP operating margin of 31.5%, and a free cash flow margin of 35%. The company raised its full-year subscription revenue outlook. The outlook reflects a prudent assessment of geopolitical headwinds on deal timing for the remainder of fiscal 2026. The Armis acquisition is expected to contribute approximately 125 basis points to second quarter subscription revenue growth, second quarter cRPO growth, and full-year 2026 subscription revenue growth. Armis is also expected to create headwinds of approximately 25 basis points to full-year 2026 subscription gross margin, 75 basis points to full-year 2026 operating margin, 200 basis points to full-year 2026 free cash flow margin, and 125 basis points to second quarter 2026 operating margin. First quarter subscription revenue growth had an approximately 75 basis point headwind from delayed closings of several large on-premise deals in the Middle East due to conflict in the region. Management expects operating and free cash flow margin expansion trajectories to normalize in fiscal 2027.
The quarter included two security acquisitions. ServiceNow closed Veza on March 2, 2026, and Armis on April 20, 2026. Management said the early close of Armis expands the addressable market and accelerates subscription revenue growth. Capital returns remained active. The company repurchased approximately 20.1 million shares during the quarter, including 18.5 million shares through a $2 billion accelerated share repurchase at an average price of $107.97 per share, and another 1.6 million shares for $225 million in open market transactions. About $4.2 billion remained available under the share repurchase program. Liquidity remains supported by cash and marketable securities, and the company has generated positive operating cash flows for more than ten years. Risks include geopolitical conflicts, macroeconomic uncertainty, tariffs, inflation, interest rates, foreign currency fluctuations, competition, cyber-security events, the ability to convert remaining performance obligations into revenue, and the integration of acquisitions. The company also faces margin pressure from higher cloud costs, acquisition amortization, and stock-based compensation.
Forecast
Reported figures
GAAP, from SEC filings| Metric | Q1 FY2026 | Q4 FY2025 | QoQ | Q1 FY2025 | YoY |
|---|---|---|---|---|---|
| Revenue | $3.77B | $3.57B | +5.7% | $3.09B | +22.1% |
| Gross profit | $2.83B | $2.73B | +3.5% | $2.44B | +16.1% |
| Gross margin | 75.1% | 76.6% | -1.6 pp | 78.9% | -3.9 pp |
| Research & development | $823.0M | $773.0M | +6.5% | $703.0M | +17.1% |
| Sales & marketing | $1.22B | $1.15B | +5.7% | $1.05B | +15.4% |
| General & administrative | $288.0M | $368.0M | -21.7% | $229.0M | +25.8% |
| Total operating expenses | $2.33B | $2.29B | +1.6% | $1.99B | +17.2% |
| Operating income (loss) | $503.0M | $443.0M | +13.5% | $451.0M | +11.5% |
| Operating margin | 13.3% | 12.4% | +0.9 pp | 14.6% | -1.3 pp |
| Net income (loss) | $469.0M | $401.0M | +17.0% | $460.0M | +2.0% |
| Net margin | 12.4% | 11.2% | +1.2 pp | 14.9% | -2.5 pp |
| Diluted EPS | $0.45 | $0.38 | +$0.07 | $2.20 | -$1.75 |
Risks
Gross margin fell to 75.1% in FY2026 Q1 (down 3.9 pp vs the prior-year quarter), with subscription gross profit percentage at 78% versus 81% and the professional services gross loss widening to 21% from 8%. Management expects subscription gross profit percentage to decrease and the professional services gross loss percentage to increase for the year ending December 31, 2026.
Cost of subscription revenues rose 46% in the three months ended March 31, 2026 versus the prior-year period, including a $41 million increase in expenses tied to contractual commitments with third-party cloud service providers and a $60 million increase in depreciation and software/maintenance costs supporting data center capacity. Management attributes the expected margin decline for 2026 primarily to ongoing growth of third-party cloud services usage.
Amortization of purchased intangibles increased 267% and business combination and other related costs rose 291% for the three months ended March 31, 2026, with G&A outside services up $35 million largely related to acquisitions. Investing cash use increased driven by a $1,307 million increase in cash used for business combinations, and the company incurred debt financing tied to its acquisition of Armis Security Ltd.
The effective tax rate rose to 30% for the three months ended March 31, 2026 from 17% in the prior-year period, with the provision for income taxes up 115% to $204 million, driven by the mix of earnings and losses across differing statutory rates and stock-based compensation shortfalls. A valuation allowance remains against California deferred tax assets, and research and development tax credit generation is expected to exceed the company's ability to use the credits in future years.
The renewal rate declined to 97% for the three months ended March 31, 2026 from 98% for the three months ended March 31, 2025, and management notes that renewal timing can make period-to-period comparisons less meaningful. Renewal rates are calculated on ACV and do not capture reduced purchases from customers that are not classified as lost.
The company is monitoring ongoing global conflicts as well as interest rates, global inflation and tariffs, which have led to global economic uncertainty; management states that if the conflicts persist or worsen, leading to greater global economic disruptions, its business and results of operations could be materially impacted. International revenues grew to 37% of total revenues for the three months ended March 31, 2026 from 36% a year earlier, increasing exposure to these conditions.
SaaS KPIs
All quarters →Non-GAAP operating margin
Free cash flow margin
Free cash flow
Renewal rate
Non-GAAP subscription gross margin
Non-GAAP income from operations
RPO
cRPO
Summary, forecast, risks and KPIs are extracted from ServiceNow, Inc.'s SEC filings for Q1 FY2026 (10-Q / 10-K and the 8-K earnings release); GAAP figures in the summary are checked against the reported XBRL data. They can contain errors; the filings are authoritative. Processed Oct 2, 2026.