01—Abstract
Summary
Summary of the 10-Q filed April 23, 2026. Cited figures are marked; the original filing is the authoritative source.
ServiceNow, Inc. (NOW) reported its first quarter 2026 results, showcasing continued strong revenue growth, albeit with a slight deceleration in gross profit margin.
Total revenues for the quarter reached $3.77 billiona, a 22% increase year-over-year, driven by a 22% rise in subscription revenues to $3.67 billion. This indicates robust demand for ServiceNow's platform and workflow solutions. However, the cost of subscription revenues increased by 46%, leading to a decrease in the subscription gross profit margin from 81% to 78%.
This was attributed to increased headcount, higher cloud service costs, and amortization from recent acquisitions. The company demonstrated a strong commitment to shareholder returns through an aggressive share repurchase program, repurchasing $2.23 billionb in the quarter, significantly more than the $398 million repurchased in the prior year's quarter. Notably, the company also announced a significant $7.8 billion acquisition of Armis Security Ltd. shortly after the quarter's end, signaling a strategic move to expand its cybersecurity offerings.
While operating expenses grew, the company's net income remained strong at $469 millionc. Investors should monitor the integration of recent and announced acquisitions and the impact of rising costs on profitability margins.
02—Key points
Key Highlights
- Total revenues grew 22% year-over-year to $3.77 billion, with subscription revenues up 22% to $3.67 billion.
- Subscription gross profit margin decreased from 81% to 78%, primarily due to increased cost of revenues related to cloud services and acquisitions.
- Operating expenses increased, with Sales & Marketing up 15%, R&D up 17%, and G&A up 26% year-over-year.
- Net income was $469 million, a slight increase from $460 million in the prior year's quarter.
- Remaining Performance Obligations (RPO) reached $27.7 billion, with 46% expected to be recognized in the next 12 months (cRPO).
- The company aggressively repurchased $2.23 billion of its common stock in the quarter, a substantial increase from the prior year.
- ServiceNow announced the acquisition of Armis Security Ltd. for approximately $7.8 billion in cash shortly after the quarter end, signaling a major expansion into cybersecurity.
03—One dollar
Follow one dollar
Of each $1.00 of revenue in Q1 FY2026, ServiceNow kept $0.12.
- Revenue$3.77B100.0%
- Cost of revenue−$940.0M24.9%
- Gross profit$2.83B75.1%
- Operating costs−$2.33B61.7%
- Operating income$503.0M13.3%
- Interest, other & tax−$34.0M0.9%
- Net income$469.0M12.4%
04—Financials
Financial Highlights
Figures from 10-QQ1 FY2026filed April 23, 2026Financial Statements
Q1 FY2026 against Q1 FY2025
| Line item | Q1 FY2026Q1 FY2025 | Change |
|---|---|---|
| Revenue | $3.77B$3.09B | +22.1% |
| Cost of Revenue | $940.00M$651.00M | +44.4% |
| Gross Profit | $2.83B$2.44B | +16.1% |
| R&D Expenses | $823.00M$703.00M | +17.1% |
| Operating Expenses | $2.33B$1.99B | +17.2% |
| Operating Income | $503.00M$451.00M | +11.5% |
| Net Income | $469.00M$460.00M | +2.0% |
| EPS (Basic) | $0.45$0.44 | +2.3% |
| EPS (Diluted) | $0.45$0.44 | +2.3% |
| Shares Outstanding (Basic) | 1.04B1.03B | +0.1% |
| Shares Outstanding (Diluted) | 1.04B1.05B | −0.7% |
05—Questions
Frequently Asked Questions
What is the overall financial performance of ServiceNow in Q1 2026?
ServiceNow reported a 22% year-over-year increase in total revenues to $3.77 billion, driven by strong subscription revenue growth. Net income was $469 million. However, the cost of subscription revenues increased significantly, leading to a decrease in the subscription gross profit margin to 78% from 81% in the prior year period.
What are the key drivers of revenue growth for ServiceNow?
Revenue growth is primarily driven by increased subscription revenues, up 22% year-over-year, due to new customer acquisitions and expanded usage by existing customers. Professional services and other revenues also saw a 19% increase.
What is the impact of recent acquisitions on ServiceNow's financials?
Recent acquisitions have contributed to an increase in goodwill and intangible assets. The increase in the cost of subscription revenues includes amortization expenses related to intangible assets acquired, impacting gross margins. Notably, the company announced a significant acquisition of Armis Security Ltd. for $7.8 billion after the quarter's close, which will further impact future financials.
How is ServiceNow managing its capital and shareholder returns?
ServiceNow is actively managing its capital through significant share repurchases, spending $2.23 billion in Q1 2026, a substantial increase from the prior year. The company also has a strong liquidity position with $7.9 billion in cash, cash equivalents, and marketable securities as of March 31, 2026.
06—Continue