ServiceNow Earnings Focus Shifts to $1.5 Billion AI Revenue Run Rate
ServiceNow reported its second-quarter 2026 results on July 22, leaving investors to evaluate whether the enterprise software provider can sustain its raised artificial intelligence revenue target after a difficult year for the stock.
ServiceNow reported its second-quarter 2026 earnings after the market close on July 22, 2026. The enterprise software company faces a binary market reaction as investors evaluate whether it can confirm its raised artificial intelligence revenue trajectory. Management recently increased its Now Assist AI revenue target from $1 billion to $1.5 billion for the year.
This metric is critical for a stock that has traded roughly 47 percent below its level a year ago and 33 percent below its December 31 close. The shares recently sat near $102, marking a decline from the 52-week high of $210.20. Despite this, a 7 percent gain over the past month indicates shifting momentum, aided by investor focus on the company's 14-year history of free cash flow per share growth.
Bulls argue that the company’s AI monetization curve justifies a steep recovery. Chief Executive Bill McDermott signaled strong demand during the first-quarter call, stating, "We had a goal to be $1 billion on our AI commit this year, as you know. And I think we might have understated that a little bit. We're already talking about $1.5 billion now, and it's on a run."
Recent operational data supports this aggressive outlook. First-quarter subscription revenue reached $3.671 billion, with remaining performance obligations hitting $27.7 billion. Non-GAAP operating margins printed at 32 percent, while Now Assist deals exceeding $1 million grew more than 30 percent year over year. Additionally, multi-product deals expanded nearly 70 percent year over year in the last quarter, and Sales CRM net new annual contract value grew more than fivefold.
The company’s 21 percent subscription growth rate currently outpaces rival Salesforce. Value-oriented investors also note that ServiceNow trades at a 7.73x price-to-sales multiple. This valuation appears discounted when compared to the richer artificial intelligence multiples commanded by peers like Palantir.
Aggressive market forecasts suggest the stock could see substantial upside if the AI thesis holds. Some projections place a 12-month price target near $332, implying 225 percent upside from current levels. This contrasts sharply with the broader Street consensus target of $141.64, highlighting the contested nature of this enterprise software turnaround.
