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Call sheet · Q1'26

ServiceNow (NOW)

Q1'26 earnings call · held April 22, 2026 · compared with the Q4'25 call · management-credibility review
9/12
Disclosure score
1 high, 4 medium, 2 low flags
Financial quality
Bottom line
The sleeper story is ServiceNow becoming the AI infrastructure toll booth - their hybrid pricing model hitting 50% of new business means every enterprise AI deployment becomes a ServiceNow revenue stream through governance and orchestration. The obvious headline is another beat-and-raise quarter, but the real constraint is integration execution risk with three major acquisitions happening simultaneously while maintaining 20%+ growth. McDermott's most telling quote: 'We didn't buy old hack companies for the revenue. We bought new innovative AI companies' - this is either brilliant strategic positioning or expensive talent shopping. My view changes if Monthly Active User growth doesn't return next quarter or if Armis integration costs exceed the 75 bps guided headwind.

The 30-second version

  • The sleeper story: NOW just became the AI infrastructure toll booth
  • Beat and raise story is real, but Middle East pushouts reveal the on-prem dependency
  • The M&A integration risk they're downplaying

What changed this quarter

MetricQ4'25Q1'26Change
Subscription Revenue$3.47B (+19.5% YoY constant currency)$3.67B (+19% constant currency)Beat high end of guidance by 150 bps
Current RPO$12.85B (+21% constant currency)$12.64B (+21% constant currency)100 bps beat vs guidance
Operating Margin31% (100 bps above guidance)32% (50 bps above guidance)Margin beat but smaller magnitude
Free Cash Flow Margin57% (+950 bps YoY)44%Massive sequential decline, normal Q1 seasonality
AI Revenue Target$1B target for 2026$1.5B tracking target+50% raise to target mid-year
Deals >$5MNot disclosed for Q416 dealsFirst disclosure of this metric
Now Assist ACV>$600M in ACVOn trajectory to exceed $1B targetAcceleration confirmed
Hybrid Pricing MixNot disclosed50% of net new businessMajor shift from seat-based model
Monthly Active Users+25% growthNot disclosedStopped reporting key usage metric
Renewal Rate98% in Q497% (including Moveworks)100 bps decline

Accountability tracked

8 new promises made4 narrative shifts flagged6 prior promises scored
Inside the full report
The complete write-up covers the full promise ledger with kept/missed calls, disclosure-quality scoring, the metrics-vanished check, verification items, and the questions to ask next quarter.
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This is a free preview. The full write-up and promise ledger are published to subscribers on Substack.
Scores, kept-promise rates, and flags on this site reflect the author's opinion, applying a stated methodology to statements management made on public earnings calls. Informational and educational purposes only - not investment advice, a recommendation, or an offer to buy or sell any security. Sources believed reliable but not guaranteed; the author may hold positions in the securities discussed.

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