ServiceNow: In line Q1, Armis integration, expanded Google partnership

ServiceNow's first quarter was in line with expectations and the company projected second quarter subscription growth of 22.5%. Separately, ServiceNow said it has expanded its partnership with Google Cloud and launched industry specific agentic AI offerings.

The company reported first quarter earnings of $469 million, or 45 cents a share, on revenue of $3.77 billion, up 22% from a year ago. Non-GAAP earnings were 97 cents a share. Wall Street was expecting ServiceNow to report first quarter non-GAAP earnings of 97 cents a share on revenue of $3.75 billion.

ServiceNow recently announced that it had closed the acquisition of Armis to expand into cybersecurity and risk. The company also said it will change its pricing strategy.

• ServiceNow ends the AI add-on, adds Context Engine, aims to scale Now Platform usage
• ServiceNow makes its cybersecurity move, acquires Armis for $7.75 billion
• ServiceNow integrates Moveworks, launches Autonomous Workforce, EmployeeWorks

CEO Bill McDermott said, "our AI growth is far exceeding even our own expectations." He added that ServiceNow's platform is seen as a way to deploy AI across clouds, models, data layers, interfaces and systems.

ServiceNow CFO Gina Mastantuono said the early close of the Armis purchase closed early and will accelerate the company's subscription revenue growth.

As for the outlook, ServiceNow said the first quarter saw a 75-basis point headwind it saw "delayed closings of several large on-premise deals in the Middle East, due to the ongoing conflict in the region." That reality colored the second quarter’s outlook given geopolitical headwinds and war in the Middle East.

The moving parts include:

• Second quarter subscription revenue will see a 125-basis point boost from Armis, which will also hit fiscal year 2026 subscription gross margin as well as a 75-basis point hit to operating margins.
• ServiceNow said that AI efficiencies internally will normalize integration costs and the margin hit to the Armis integration.
• Subscription revenue in the second quarter will be $3.81 billion to $3.82 billion, up 22.55.
• For fiscal 2026, ServiceNow projected subscription revenue of $15.73 billion to $15.77 billion, up 22% to 22.5%.

At Google Cloud Next, ServiceNow said it and Google Cloud are teaming up on joint offerings for AI agents in 5G networking, retail and IT systems. The companies will integrate Google Cloud's Gemini Enterprise platform and ServiceNow's AI Platform in a move that will couple ServiceNow AI Control Tower, Workflow Data Fabric and Google Cloud BigQuery. The companies will also run on a shared interoperability framework built on AI agent standards.