Business

ServiceNow CEO confirms recent acquisitions reflect future potential, not cash value

By Aditya Raghunath TheStreet

Updated May 4, 2026 2:24 PM

Wall Street has been watching ServiceNow closely. The enterprise software giant has gone on a buying spree, snapping up the artificial intelligence firms Moveworks, Veza, and Armis in quick succession.

Some investors wondered whether the company was papering over a growth gap.

ServiceNowCEO Bill McDermott had a pointed answer for them on the first-quarter 2026 earnings call.

His message wasn't wrapped in corporate speak. It was direct, and it set the record straight on what this acquisition strategy is all about.

ServiceNow is built on 22 years of enterprise AI data

Before getting to McDermott's blunt remarks, it helps to understand what makes ServiceNow's (NOW) position unusual in the AI arms race.

The company sits at the center of how large enterprises manage their operations, from IT tickets to HR workflows to cybersecurity.
Think of it as the operating system that keeps a Fortune 500 company running behind the scenes.
Over the past 22 years, ServiceNow has processed more than 95 billion workflows annually and seven trillion transactions.
That accumulated data gives its artificial intelligence something most competitors lack: deep, real-world enterprise context.
Every AI decision the SaaS giant makes is grounded in live approval chains, asset histories, compliance rules, and vendor track records.
The company calls this its "Context Engine." It's a meaningful moat, and it gets stronger with every workflow the platform runs.

That foundation matters because it frames why McDermott is so bullish and why he pushed back so sharply when investors questioned his acquisition logic.

ServiceNow stock is struggling in 2026

Valued at amarket cap of $94 billion, NOW stock is down 38% year to date and 61% below all-time highs.

Analysts and investors are worried that the demand for SaaS-based tools and services will plunge over the next decade, driven primarily by AI.

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The tech stock also dropped roughly 14% following the earnings release, CNBC noted, which prompted pointed questions on the call.

Analysts wanted to know why the full-year revenue guidance, excluding the Armis acquisition, didn't move higher, despite a strong first-quarter beat.

McDermott emphasized that Moveworks, Veza, and Armis were not bought to patch a shortfall. None of them came with years of established revenue to bolt onto the income statement.

These were bets on technology and talent, on patented AI capabilities, and on founders who could now run product divisions inside a much larger distribution machine.

The Moveworks integration is the clearest proof point so far. ServiceNow folded Moveworks' conversational AI into a new product called EmployeeWorks in under three weeks.

In the first quarter, that combined unit closed more deals than Moveworks had in the entire prior year. The business grew five times year over year, according to McDermott.

Armis, which closed earlier than expected, brings a different kind of upside. Nine of the 10 largest companies in the world already use Armis for device visibility, spotting every connected asset across a network, including Internet of Things (IoT) devices and industrial equipment that traditional security tools miss.

Cybercrime costs the global economy roughly $1 trillion a month.

McDermott compared Armis to Instagram, a high-value asset that could grow dramatically once plugged into the right infrastructure.

"Armis is going to be our Instagram, and I'll tell you why," McDermott stated. "The #3 economy in the world is cybercrime. It's $1 trillion a month. We now have a situation where on the IT and the OT landscape of every major corporation, we are managing the agents and the humans, and we are managing the landscape of the threat actors."

It's a bold analogy, but the underlying logic holds.

Morris/Bloomberg via Getty Images

ServiceNow's strong performance in Q1

In Q1 of 2026, ServiceNowreported revenue of $3.671 billion, an increase of 19% year over year, and above management guidance.

It ended Q1 with remaining performance obligations (RPO) of $27.7 billion, up 24%.

Current RPO, which captures revenue expected in the next 12 months, came in at $12.64 billion, which was one percentage point above guidance.

AI adoption inside the platform also accelerated. The number of customers spending $1 million or more on Now Assist, ServiceNow's AI product suite, grew more than 130% YoY. Deals including three or more Now Assist products jumped nearly 70%.

Earlier this year, the company set a $1 billion target for Now Assist revenue in 2026. McDermott quietly upgraded that on the call to $1.5 billion, a 50% increase.

Chief Financial Officer Gina Mastantuono confirmed the methodology for counting that revenue hasn't changed.

ServiceNow also bought back roughly 20.2 million shares in the first quarter alone, doubling the total repurchased in all of 2025.

Is NOW stock a buy, sell, or hold?

Analysts tracking ServiceNow stock forecast revenue to increase from $13.28 billion in 2025 to $30 billion in 2030.

In this period, free cash flow is projected to expand from $4.64 billion to $11.6 billion.

If NOW stock is priced at 20x forward FCF, which is reasonable, it could more than double over the next four years.

Out of the 37 analysts covering NOW stock, 32 recommend "buy", four recommend "hold", and one recommends "sell."

The average ServiceNow stock price target is $138, 51% above the current price.

What NOW stock investors should watch next

McDermott closed by invoking Warren Buffett's line about markets being voting machines in the short run and weighing machines in the long run.

It was a signal to investors: Don't let a single day's stock move define how you think about this company's trajectory.

The Financial Analyst Day on May 4 in Las Vegas is expected to lay out a long-range plan, including margin expansion targets, revenue acceleration timelines, and how the AI consumption flywheel is expected to build.

For now, the message from McDermott was unambiguous. ServiceNow isn't buying revenue. It's buying the future. Whether the market agrees is a different vote altogether.

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This story was originally published May 4, 2026 at 2:03 PM.