ServiceNow Reports Q1 Revenue Beat Despite Middle East Delays, Shares Drop 13%

ServiceNow shares tumbled 13% in after-hours trading on Wednesday night, despite the company reporting better-than-expected first-quarter revenue and earnings. The software provider's first-quarter results were dented by delays in the Middle East, contributing a 75 basis point headwind to subscription revenue growth tied to delayed on-premise deal closings in the region.

ServiceNow's subscription revenue grew 19% on a constant currency basis in the first quarter.

CEO Bill McDermott downplayed concerns that the Iran war is materially disrupting ServiceNow's business during an interview with CNBC's Jim Cramer on Wednesday. McDermott stated that the impact from Middle East delays is largely about timing rather than demand deterioration stemming from the Iran war. ' ServiceNow shares have been down roughly 30% this year as of Wednesday.

Beyond geopolitical issues, McDermott argued that artificial intelligence is a tailwind for ServiceNow rather than a threat. ' He described ServiceNow's software as commonly used by IT and human resources departments to automate workflows and handle tasks such as ordering devices for new employees.

McDermott noted that demand trends remain strong, with continued expansion in the company's user base and accelerating AI-related adoption.