ServiceNow (NOW) reports disappointing Q1 earnings, revenue growth decelerates
ServiceNow shares fell 3.1% to $87.71 on Wednesday, 29 April 2026, after the company reported disappointing first-quarter 2026 earnings following market close yesterday. The results, which included decelerating revenue growth under 20% and a gross profit decline of approximately 3% year-on-year, reignited broader concerns regarding the software sector.
The company's cost of goods sold (COGS) increased 44% year-on-year, a rise attributed to escalating AI-related expenses and its recent acquisition of Armis. This earnings miss erased gains from earlier in the week, including a 3.9% rise on Monday, 27 April, following the finalisation of its $7.75 billion Armis acquisition.
Today's decline extends a year-to-date trend, with the stock already down 30% as investors assess the impact of AI agents on traditional software platforms. ServiceNow's current trading price of $87.71 marks a notable drop from its previous close of $90.49.
Why ServiceNow's Growth Expectations Are Being Reworked
ServiceNow provides a cloud-based software platform that helps large organisations manage their digital workflows across various departments, from IT and human resources to customer service. Essentially, they offer a suite of tools that automate and streamline complex business processes, allowing companies to operate more efficiently. Their revenue primarily comes from subscriptions to these services, serving a global client base of enterprises looking to modernise their operations.
Today's share price movement stems directly from the company's first-quarter 2026 earnings report, released yesterday after the market closed. Investors had anticipated stronger performance, but the results showed decelerating revenue growth, coming in under 20%, alongside a year-on-year gross profit decline of approximately 3%. This earnings miss was largely driven by a significant 44% year-on-year increase in the cost of goods sold, attributed to rising expenses related to artificial intelligence development and the recent $7.75 billion acquisition of Armis.
These disappointing figures have led to ServiceNow shares trading down 3.1% today, currently at $87.71, a notable drop from yesterday's close of $90.49.
Think of it like a highly-rated restaurant known for its consistent, innovative dishes. If, one evening, the food arrives later than expected, the portion sizes are noticeably smaller, and the bill is surprisingly higher due to expensive new ingredients, customers might leave feeling underwhelmed. Even if the restaurant is investing in a new, cutting-edge kitchen, the immediate experience falls short of the established high expectations, leading to a dip in satisfaction.
ServiceNow
ServiceNow, Inc. (NOW) delivers enterprise cloud computing solutions globally, streamlining and automating services for businesses. Its core offering, the Now platform, facilitates workflow automation, leveraging artificial intelligence, machine learning, and robotic process automation. The company provides a comprehensive suite of applications, including IT service management, IT business management, IT operations management, and IT asset management. Additionally, it offers security operations, governance, risk, and compliance products, alongside human resources, legal, and customer service delivery solutions. ServiceNow also develops App Engine and IntegrationHub for extending workflows and provides professional services. Serving diverse sectors such as government, financial services, healthcare, and telecommunications, the company operates through direct sales and resale partners. Founded in 2004, ServiceNow is headquartered in Santa Clara, California.