ServiceNow Inc (NYSE:NOW, XETRA:4S0) reported in-line to better-than-expected first quarter results, but concerns over growth trends and margins weighed on the stock, sending it about 14% lower at Thursday’s open.
The enterprise software company reported adjusted earnings per share of $0.97, in line with expectations.
Revenue was $3.77 billion, above forecasts of $3.74 billion. Subscription revenue came in at $3.67 billion, above the consensus estimate of about $3.65 billion.
The company reported current remaining performance obligations of $12.64 billion, up 22.5% from a year earlier, and total remaining performance obligations of $27.7 billion, representing 25% growth.
Large deal activity remained strong, with 16 new transactions exceeding $5 million in annual contract value and a total of 630 customers above that threshold.
However, several factors contributed to the negative market reaction. ServiceNow indicated that geopolitical instability in the Middle East delayed certain government-related deals, creating an estimated 75 basis point headwind to subscription growth in the quarter.
At the same time, the company lowered its full-year adjusted operating margin target to 31.5%, down from 32%. It cited near-term pressure from integrating its $7.75 billion acquisition of Armis, which is expected to compress margins in the short term.
“ServiceNow’s first quarter performance beat the high end of our guidance once again,” chief executive CEO Bill McDermott said. “With this foundation, our AI growth is far exceeding even our own expectations, reinforcing our position as one of the fastest growing enterprise software companies ever.”
Looking ahead, ServiceNow projected second-quarter subscription revenue in the range of $3.815 billion to $3.82 billion, above estimates of $3.75 billion.
The company also raised its full-year target for AI-related annual recurring revenue to $1.5 billion, signaling continued investment in artificial intelligence as a growth driver.