ServiceNow NOW is scheduled to release its first-quarter 2026 results on April 22.
The Zacks Consensus Estimate for first-quarter revenues is currently pegged at $3.75 billion, indicating 21.4% growth from the figure reported in the year-ago quarter.
The consensus mark for earnings is pegged at 95 cents per share, unchanged over the past 30 days and indicates growth of 17.3% from the figure reported in the year-ago quarter.
Consensus Earnings Trend
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ServiceNow’s earnings beat the Zacks Consensus Estimate in all the trailing four quarters, the average surprise being 10.6%.
ServiceNow, Inc. Price and EPS Surprise
ServiceNow, Inc. price-eps-surprise | ServiceNow, Inc. Quote
Let’s see how things are shaping up prior to this announcement.
ServiceNow’s Q1 to Aid From Expanding Clientele
ServiceNow’s strong portfolio is helping it expand its enterprise customer base. As of the end of 2025, the company served more than 8,800 global customers, including more than 85% of the Fortune 500, reflecting the strong adoption of its cloud-based platform among large enterprises. These organizations rely on the ServiceNow AI Platform to support digital transformation initiatives and automate workflows across critical business operations. High customer retention and continued enterprise expansion are expected to have benefited ServiceNow’s results in the to-be-reported quarter.
The company is seeing deeper engagement from large customers, which is driving higher contract values and recurring revenues. In the fourth quarter of 2025 alone, ServiceNow closed 244 deals worth more than $1 million in net new Annual Contract Value (ACV), highlighting strong enterprise demand for its solutions. The number of customers generating more than $5 million in ACV reached 603, while the number of customers contributing more than $20 million annually grew by more than 30% year over year. These trends indicate increasing adoption of multiple products and broader platform deployments within existing enterprises, which is expected to have driven top-line growth in the first quarter of 2026.
However, NOW’s business model has suffered from strong adoption of AI-native solutions. A shift from self-hosted deployments to hosted and hyperscaler-based offerings is expected to create about a 150-basis-point (bps) headwind to subscription revenue growth in the first quarter of 2026. ServiceNow expects subscription revenues between $3.65 billion and $3.67 billion, suggesting year-over-year growth in the range of 21.5% on a GAAP basis and in the 18.5% to 19% on a constant currency basis.
ServiceNow Shares Lag Sector, Overvalued
NOW shares have dropped 36.9% year to date, outperforming the Zacks Computer & Technology sector’s return of 6.2%. Intensifying competition from the likes of Microsoft MSFT, Oracle ORCL and Salesforce CRM hurts NOW’s prospects. Shares of Microsoft, Oracle and Salesforce have dropped 12.6%, 10.2% and 31.2%, respectively, over the same time frame.
NOW Stock’s Price Performance
Image Source: Zacks Investment Research
ServiceNow’s Value Score of D suggests a stretched valuation at this moment.
In terms of the forward 12-month price/sales (P/S), NOW is trading at 22.01X, higher than the Zacks Computers – IT Services industry’s 18.99X and Salesforce’s 13.51X. However, NOW is trading at a discount compared with Microsoft’s 22.88X and Oracle’s 22.17X.
NOW Shares Overvalued
Image Source: Zacks Investment Research
Can ServiceNow’s AI Platform Help the Stock Recover?
NOW’s prospect benefits from an expanding total addressable market (TAM) with additions of AI agents, security (with Armis acquisition), identity (with Veza acquisition) and employee as well as customer workflows. Management now believes TAM has expanded from roughly $90 billion to $600 billion thanks to frequent acquisitions. Moreover, collaborations with the likes of Figma, NTT Data, Microsoft, OpenAI, Anthropic, Fiserv and Panasonic Avionics aim to integrate advanced AI models, copilots and agents into enterprise workflows, improving interoperability and accelerating adoption of AI-powered solutions.
ServiceNow raised subscription revenue guidance for 2026, which is now expected between $15.530 billion and $15.570 billion, suggesting 19.5-20% growth on a non-GAAP constant currency (cc) basis. However, the growth rate is slower than 20.5% reported in 2025. Apart from significant competition, ServiceNow’s prospects are risky due to integration risks following the Moveworks, Veza and Armis acquisitions.
Conclusion
ServiceNow’s expanding portfolio, rich partner base and acquisitions are expected to drive its subscription revenues in the long term. However, stiff competition and macroeconomic headwinds are major concerns, along with a stretched valuation.
ServiceNow currently has a Zacks Rank #4 (Sell), which implies investors should avoid the stock ahead of the quarterly result announcement.
You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
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This article originally published on Zacks Investment Research (zacks.com).