Review|NOW 1Q26: Becoming CRM-ish?

NOW’s print was disappointing. The updated FY26 subscription revenue guide (constant currency), excluding M&A contributions, was revised down by 25bps. Management attributed the weakness primarily to delayed Middle East on-premise orders impacted by the war, but the result nonetheless reflects the ongoing deceleration in NOW’s core organic business. More importantly from a growth-driver and reporting-transparency perspective, NOW is starting to resemble CRM from several years ago — relying increasingly on inorganic M&A to offset a slowing core business, which reduces financial statement transparency and pressures both cash flow and margins. On AI monetization, management raised the 2026 year-end “AI commit” target from $1bn to $1.5bn, and committed to providing further detail at the May 4 Investor Day.

Organic growth guidance revised down

FY26 full year:

• Subscription revenue guide was raised to 20.5–21.0% YoY cc. Excluding out the 125bps contribution from the Armis acquisition (closed 4/20), growth is 19.25–19.75% YoY cc, a 25bps downward revision versus the prior guide. After further excluding the 100bps contribution from the Moveworks acquisition (closed in March), core organic growth guidance is 18.25–18.75% YoY cc — also 25bps below the prior guide.

• Management cited delayed Middle East on-premise orders (war-related) as the reason some deals failed to close in 1Q, impacting the full-year outlook.

• Beyond Armis, Veza and Pyramid Analytics were also consolidated in 2Q, but management indicated their contribution is de minimis.