ServiceNow 1Q26: More Control, Less Conviction

NOW (holding update): Non-seat pricing now 50% of net new biz; AI ACV raised 50% to $1.5B; EmployeeWorks closed 6 $1M+ deals in Q1. But FY raise mostly Armis ($197M) + FX ($44M); organic flat-to-negative. Gross margin fell to 81.5% (from 84.5% in Q1'25) as AI inference costs rise faster than leverage kicks in. Q2 cRPO guide 19.5%, decelerating from 21%. Bull case needs proof AI delivery costs stabilize & consumption inflects; bear case is structural margin compression. FAD on May 4 key catalyst for organic re-acceleration framework & margin bottom. Stock weak despite product strength reflects economic uncertainty, not strategic doubt.

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