We spoke with three top ServiceNow (NOW) channel partners. 1Q26 performance came in largely in line with expectations — growth moderated from the 4Q25 budget-flush quarter, but full-year 2026 targets remain intact, with pipeline visibility broadly healthy. Overall, AI adoption remains soft, but we think the most notable incremental datapoint this quarter is the customer traction of AI Control Tower (AICT), which is showing up in the majority of new pipeline deals. Early anecdotes suggest that hardware pricing inflation is squeezing software budgets to some extent. Despite generally low expectations for results following the recent sell-off, we remain cautious about the positioning of application SaaS companies as LLMs become increasingly powerful.
1Q26 growth in line, full-year 2026 targets intact
North American Channel Partner A
• 1Q26 Growth: NOW practice achieved 20.7%–20.8% yoy (4Q: 21.2-21.3%, stronger than expected due to budget flush), slightly below internal target of 21.3%+. Macro softness in 1H led to a weaker-than-expected AI uplift.
• Vertical Mix: All modules tracked steadily; the shortfall was concentrated in the AI-related upside that did not materialize on pace.
• 1H26 Target: Maintained at 20.6%–21.5% yoy, unchanged from three months ago.
• Moveworks Contribution: Expected to begin contributing from 2Q onward, though ramp should be gradual; go-to-market structure (standalone vs. bundled) still under evaluation.
• Relative Positioning: NOW remains the best-performing SaaS platform in the partner’s book; CRM (Salesforce) is the weakest.
Global Channel Partner B
• 1Q26 Growth: Modestly above plan. Target was 10–15% yoy (seasonal low), delivery came in at the higher end.
• 2Q26 Pipeline: Target 15–20% yoy; pipeline healthy, partner expects to be above plan.
• 2025 Performance: Global NOW practice ($300-400m) grew 15–20% yoy (near low end), 1–2ppts below initial expectations. Quarterly cadence: 1H particularly weak due to macro weakness, 3Q25 +20–25% (low end), 4Q25 +20–25% (high end, above plan).
• 2026 Full-Year Target: 15–20% yoy (near high end), effectively 20%+ — an acceleration vs. 2025.
• Drivers of Acceleration: (i) modestly better overall customer IT spending, (ii) healthy ITSM/ITOM transformation pipeline, (iii) low-base effect in 1H25 with orders shifted to 2H25/1H26, (iv) accelerating cross-sell into non-IT modules.
• Hardware Price Inflation: No observable impact on NOW budgets; customers are actively shifting spend to cloud/SaaS.
