ServiceNow (NOW) stock sank about 13% in Thursday’s pre-market trading as the software company’s Q1 2026 earnings failed to address investor concerns about AI disruption. The impact of the Middle East conflict and margin pressure from the integration of Armis, a recently acquired cybersecurity startup, also spooked investors.
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Following the results, Evercore analyst Kirk Materne reiterated a Buy rating on NOW stock with a price target of $175. The analyst stated that while the company’s guidance reflects caution due to geopolitical risks, it is “likely to play into the bear narrative,” given that we are in the “shoot first” world, and investors are also worried about AI disruption.
Prior to Q1 results, NOW stock was already down 33% year-to-date on fears that AI models could impact Software as a Service (SaaS) companies.
Key Insights from ServiceNow’s Q1 Results
ServiceNow reported a 22% year-over-year growth in its Q1 2026 revenue to $3.77 billion, slightly ahead of the Street’s estimate of $3.75 billion. Subscription revenue rose 22% to $3.67 billion. The company said that the first-quarter subscription revenue growth was impacted by a 75-basis-point headwind from the delayed closings of several large on-premise Middle East deals due to the Iran conflict.
Meanwhile, Q1 2026 adjusted EPS (earnings per share) increased about 20% year-over-year to $0.97, in line with the consensus.
On the positive side, ServiceNow highlighted that it had 16 transactions with net new annual contract value (ACV) of more than $5 million in Q1 2026, up 80% year-over-year. Overall, NOW ended Q1 2026 with 630 customers having more than $5 million in ACV, reflecting about 22% year-over-year growth.
Guidance Raises Concerns
ServiceNow expects Q2 2026 subscription revenue in the range of $3.815 billion to $3.820 billion. Analysts were expecting revenue of $3.75 billion. While Q2 topline is expected to benefit from the Armis acquisition, its integration is estimated to reduce the quarter’s operating margin by about 125 basis points.
Meanwhile, NOW raised its 2026 subscription revenue guidance to the range of $15.735 billion to $15.775 billion, up from the previous forecast of $15.53 billion to $15.57 billion. It expects Armis integration to impact full-year subscription gross margin and operating margin by about 25 basis points and 75 basis points, respectively.
Evercore Analyst’s Views
Evercore’s Materne noted that while ServiceNow’s Q1 results were essentially “in line to slightly ahead” of the Street’s estimates, the decline in the stock reflects the “quality” of the Fiscal 2026 outlook. The 4-star analyst noted that while the company raised its full-year guidance, it is slightly lower on an adjusted basis (about 25 basis points) when excluding the incremental Armis contribution.
Materne thinks the main debate following the Q1 print will be whether the conservative guidance is hiding steady momentum in the business or reflects a slowdown.
Is NOW Stock a Buy, Sell, or Hold?
Currently, Wall Street has a Strong Buy consensus rating on ServiceNow stock based on 30 Buys, four Holds, and one Sell. The average NOW stock price target of $163.50 indicates about 59% upside potential from current levels.
These ratings/price targets could be revised as more analysts react to the Q1 2026 print.
