Key Takeaways:
- ServiceNow beat Q2 estimates on revenue and EPS, raising its full-year outlook.
- AI annual contract value crossed $1 billion for the first time.
- The stock surged more than 7% in pre-market trading on July 23.
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ServiceNow jumps 7% as AI bookings top $1B and guidance raised
ServiceNow reported Q2 revenue of $3.99 billion, beating estimates, and raised its full-year subscription forecast.
"ServiceNow's exceptional Q2 results solidify our position as the fastest-growing major enterprise software and cybersecurity company," Chairman and Chief Executive Bill McDermott said.
Adjusted earnings came in at 90 cents per share, topping the 86-cent consensus. Subscription revenue rose 24.5% year over year to $3.88 billion. Current remaining performance obligations, a key measure of booked revenue, reached $13.2 billion, up 21%. The company closed 123 deals worth more than $1 million in net new annual contract value, up nearly 40% from a year earlier.
The results eased concerns that artificial intelligence tools are eroding demand for established enterprise software platforms. ServiceNow raised its full-year subscription revenue guidance to as much as $15.78 billion, implying growth of about 22.5%.
The company's AI portfolio crossed $1 billion in annual contract value during the quarter, and agentic deployments of its software increased ninefold over the past nine months, McDermott said. ServiceNow ended June with 658 customers each paying more than $5 million a year, up about 23% year over year.
President and Chief Financial Officer Gina Mastantuono said net new AI bookings again outpaced expectations and that the company's AI Control Tower was fueling growth in its security and risk business. She also noted that ITOM was seeing strong demand tailwinds for the CMDB to serve as a governance and data foundation.
For the third quarter, ServiceNow guided to subscription revenue of about $3.98 billion, up 20.5%. The company attributed some on-premises revenue pull-forward from the third quarter into the second to strong US federal demand.
The guidance raise signals management expects AI-driven demand to sustain its momentum. Investors will watch the Q3 earnings call for updated margin targets as the company pursues its long-term goal of a Rule of 60-plus operating model.
This article is for informational purposes only and does not constitute investment advice.
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