We use cookies to understand how you use our site and to improve your experience.
This includes personalizing content and advertising.
By pressing "Accept All" or closing out of this banner, you consent to the use of all cookies and similar technologies and the sharing of information they collect with third parties.
You can reject marketing cookies by pressing "Deny Optional," but we still use essential, performance, and functional cookies.
In addition, whether you "Accept All," Deny Optional," click the X or otherwise continue to use the site, you accept our Privacy Policy and Terms of Service, revised from time to time.
You are being directed to ZacksTrade, a division of LBMZ Securities and licensed broker-dealer. ZacksTrade and Zacks.com are separate companies. The web link between the two companies is not a solicitation or offer to invest in a particular security or type of security. ZacksTrade does not endorse or adopt any particular investment strategy, any analyst opinion/rating/report or any approach to evaluating individual securities.
If you wish to go to ZacksTrade, click OK. If you do not, click Cancel.
NOW's AI-Driven Subscription Growth Accelerates: More Upside Ahead?
Read MoreHide Full Article
Key Takeaways
NOW Q1 subscription revenues rose 22% to $3.671B; constant-currency growth was 19%.
ServiceNow logged 16 deals above $5M net new ACV; current RPO jumped 22.5% to $12.6B.
NOW raised 2026 subscription outlook to $15.7-$15.8B as ~50% of net new business shifts beyond seats.
ServiceNow’s (NOW - Free Report) strong subscription growth continues to reinforce confidence in its long-term prospects. In the first quarter of 2026, subscription revenues increased 22% year over year to $3.671 billion, underscoring broad platform demand as customers lean into AI-enabled workflow automation. At constant currency (cc), subscription revenues increased 19% year over year to $3.57 billion. The reported quarter confirmed that subscription revenues remain the core growth engine, supported by strong renewals, expanding deal sizes, and increasing AI-led monetization.
NOW management highlighted robust expansion in high-value contracts, including 16 deals above $5 million in net new annual contract value (ACV) and accelerating adoption of AI-driven products. This is translating into strong forward visibility, with current remaining performance obligations increasing 22.5% year-over-year to $12.6 billion, supporting near-term subscription revenue conversion.
Subscription revenue growth is increasingly tied to AI monetization and pricing innovation. Management noted that roughly 50% of net new business now comes from non-seat-based pricing models, including consumption-based elements, signaling a structural shift in how subscription revenue scales. AI products such as Now Assist are seeing rapid uptake, with management indicating demand is ahead of expectations and contributing to upsell activity across the installed base. The company has $8 billion of current deferred revenue on the balance sheet and $27.7 billion in total remaining performance obligations, underscoring multi-year revenue visibility.
ServiceNow raised its full-year subscription revenue outlook to approximately $15.7–$15.8 billion, implying roughly 21% cc growth. On a non-GAAP basis, subscription revenues are expected to grow between 20.5% and 21%. Management expects additional acceleration from the Armis acquisition and continued AI-driven expansion, despite modest geopolitical headwinds.
NOW Faces Tough Competition
ServiceNow is facing stiff competition from the likes of Salesforce (CRM - Free Report) and Atlassian (TEAM - Free Report) .
Salesforce is strengthening its position in the subscription-led landscape with its AI-first platform strategy. Its Agentforce, Data Cloud and Slack create a unified ecosystem that drives recurring revenue growth and large enterprise deals. CRM benefits from embedding AI into workflows across sales and service, boosting efficiency and customer value. With strong adoption of AI-driven offerings and expansion into ITSM, Salesforce is increasingly competing with ServiceNow while enhancing its subscription-based growth model.
Atlassian continues to build strength in the subscription-led landscape through its cloud-based “system of work” platform. It benefits from a product-led model, strong enterprise adoption and growing cloud revenues, driving recurring subscriptions. TEAM’s AI-powered tools like Jira, Rovo and Teamwork Graph enhance workflows and collaboration, supporting long-term customer retention. With flexible pricing and rising enterprise deals, the company is expanding into IT workflows, positioning itself as a strong competitor in subscription-driven growth.
ServiceNow shares have dropped 41.2% year to date, underperforming the broader Zacks Computer and Technology sector’s return of 8.8%. In comparison, shares of Salesforce and Atlassian have dropped 32.8% and 55.9%, respectively.
NOW Stock’s YTD Price Performance
Image Source: Zacks Investment Research
The NOW stock is trading at a premium, with a forward 12-month price/sales of 5.47X compared with Salesforce’s 3.1X and Atlassian’s 2.61X. ServiceNow has a Value Score of D.
Valuation: NOW vs. TEAM
Image Source: Zacks Investment Research
Valuation: NOW vs. CRM
Image Source: Zacks Investment Research
The Zacks Consensus Estimate for 2026 earnings is pegged at $4.13 per share, down by a penny over the past 30 days, suggesting 17.7% growth from 2025’s reported figure.
View the Zacks #1 Rank List
Image: Bigstock
NOW's AI-Driven Subscription Growth Accelerates: More Upside Ahead?
Key Takeaways
ServiceNow’s (NOW - Free Report) strong subscription growth continues to reinforce confidence in its long-term prospects. In the first quarter of 2026, subscription revenues increased 22% year over year to $3.671 billion, underscoring broad platform demand as customers lean into AI-enabled workflow automation. At constant currency (cc), subscription revenues increased 19% year over year to $3.57 billion. The reported quarter confirmed that subscription revenues remain the core growth engine, supported by strong renewals, expanding deal sizes, and increasing AI-led monetization.
NOW management highlighted robust expansion in high-value contracts, including 16 deals above $5 million in net new annual contract value (ACV) and accelerating adoption of AI-driven products. This is translating into strong forward visibility, with current remaining performance obligations increasing 22.5% year-over-year to $12.6 billion, supporting near-term subscription revenue conversion.
Subscription revenue growth is increasingly tied to AI monetization and pricing innovation. Management noted that roughly 50% of net new business now comes from non-seat-based pricing models, including consumption-based elements, signaling a structural shift in how subscription revenue scales. AI products such as Now Assist are seeing rapid uptake, with management indicating demand is ahead of expectations and contributing to upsell activity across the installed base. The company has $8 billion of current deferred revenue on the balance sheet and $27.7 billion in total remaining performance obligations, underscoring multi-year revenue visibility.
ServiceNow raised its full-year subscription revenue outlook to approximately $15.7–$15.8 billion, implying roughly 21% cc growth. On a non-GAAP basis, subscription revenues are expected to grow between 20.5% and 21%. Management expects additional acceleration from the Armis acquisition and continued AI-driven expansion, despite modest geopolitical headwinds.
NOW Faces Tough Competition
ServiceNow is facing stiff competition from the likes of Salesforce (CRM - Free Report) and Atlassian (TEAM - Free Report) .
Salesforce is strengthening its position in the subscription-led landscape with its AI-first platform strategy. Its Agentforce, Data Cloud and Slack create a unified ecosystem that drives recurring revenue growth and large enterprise deals. CRM benefits from embedding AI into workflows across sales and service, boosting efficiency and customer value. With strong adoption of AI-driven offerings and expansion into ITSM, Salesforce is increasingly competing with ServiceNow while enhancing its subscription-based growth model.
Atlassian continues to build strength in the subscription-led landscape through its cloud-based “system of work” platform. It benefits from a product-led model, strong enterprise adoption and growing cloud revenues, driving recurring subscriptions. TEAM’s AI-powered tools like Jira, Rovo and Teamwork Graph enhance workflows and collaboration, supporting long-term customer retention. With flexible pricing and rising enterprise deals, the company is expanding into IT workflows, positioning itself as a strong competitor in subscription-driven growth.
NOW’s Share Price Performance, Valuation & Estimates
ServiceNow shares have dropped 41.2% year to date, underperforming the broader Zacks Computer and Technology sector’s return of 8.8%. In comparison, shares of Salesforce and Atlassian have dropped 32.8% and 55.9%, respectively.
NOW Stock’s YTD Price Performance
Image Source: Zacks Investment Research
The NOW stock is trading at a premium, with a forward 12-month price/sales of 5.47X compared with Salesforce’s 3.1X and Atlassian’s 2.61X. ServiceNow has a Value Score of D.
Valuation: NOW vs. TEAM
Image Source: Zacks Investment Research
Valuation: NOW vs. CRM
Image Source: Zacks Investment Research
The Zacks Consensus Estimate for 2026 earnings is pegged at $4.13 per share, down by a penny over the past 30 days, suggesting 17.7% growth from 2025’s reported figure.
ServiceNow, Inc. Price and Consensus
ServiceNow, Inc. price-consensus-chart | ServiceNow, Inc. Quote
ServiceNow currently carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.