ServiceNow (NOW) Stock Falls 12% After Earnings: AI Is Booming, But One Number Stung

TLDR

• ServiceNow posted Q1 revenue of $3.77B, slightly above estimates, but EPS came in only in-line at $0.97/share
• The stock dropped 12% in after-hours trading on Wednesday
• Middle East deal delays tied to the Iran war created a ~75 basis-point headwind on subscription revenue growth
• NOW Assist generative AI large customers grew over 130% year-over-year
• Raymond James cut its price target from $160 to $130 but kept an Outperform rating

ServiceNow (NOW) reported its first-quarter 2026 results on Wednesday, and while the numbers technically cleared the bar, Wall Street wasn’t impressed enough to celebrate.

The company posted adjusted EPS of $0.97, exactly in-line with analyst estimates. Revenue came in at $3.77 billion, just ahead of the $3.75 billion consensus. On paper, a beat. In reality, the market wanted more.

The stock fell 12% in after-hours trading. Coming into earnings, NOW was already down 33% for the year — so investors were looking for a clear upside surprise, not a photo finish.

ServiceNow, Inc., NOW

Subscription revenue for the quarter hit $3.67 billion, narrowly above the $3.65 billion estimate. But the company flagged that growth took a roughly 75 basis-point hit from delayed closings on large on-premise deals in the Middle East, linked to the ongoing war in Iran.

That detail caught attention. A geopolitical conflict directly denting a software company’s quarterly numbers is not a typical earnings story.

AI Growth Still a Bright Spot

Despite the cautious reaction, there was a genuine standout in the results. Large customers for ServiceNow’s Now Assist generative AI suite — those with annual contract values above $1 million — grew more than 130% from a year ago.

That kind of growth matters to investors who are watching closely to see whether AI actually translates into revenue, not just headlines.

Raymond James analyst Michael Turtis cut his price target on NOW from $160 to $130 following the report, but kept his Outperform rating in place. He noted that upside across key growth metrics narrowed, and the mismatch between reported results and investor guidance expectations came down to acquisition integration, accounting differences, and those pushed Middle East deals.

Guidance Above Estimates

The forward outlook was better than the initial reaction might suggest.

For Q2, ServiceNow guided subscription revenue of $3.815 billion to $3.82 billion — above the Street’s $3.75 billion estimate. Full-year subscription revenue guidance of $15.7 billion to $15.8 billion also came in above the $15.6 billion Wall Street expected.

Raymond James noted that ServiceNow’s organic outlook was effectively unchanged. The firm added that management plans to disclose at an upcoming analyst day that 2026 AI-related ACV expectations have increased by 50%.

The stock was trading at $103.07 following the report, down 45% over the past six months and well off its 52-week high of $211.48.

ServiceNow completed its $7.75 billion acquisition of Armis, a cyber exposure management company, earlier this year. It also acquired Veza in March 2026. Raymond James said it will reassess its thesis ahead of ServiceNow’s Knowledge conference in early May.

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