ServiceNow Lifts Guidance as AI Contract Value Tops $1 Billion
ServiceNow posted strong second-quarter results and raised its full-year revenue guidance, yet its stock continues to suffer from broader market fears that artificial intelligence will disrupt traditional software models.
ServiceNow reported second-quarter revenue of $3.99 billion, a 24 percent year-over-year increase that surpassed analyst expectations of $3.93 billion. Adjusted earnings per share rose 11 percent to $0.90, beating estimates of $0.86.
Despite the beat, shares of the enterprise software provider have plummeted 40 percent this year. The decline reflects a persistent market narrative that artificial intelligence will cannibalize the legacy software layer, dragging down valuations across the SaaS sector regardless of underlying operational performance. ServiceNow's platform serves as the backbone of its customers' entire software stacks, but this structural advantage has not insulated its valuation from the sell-off.
The company's core subscription business generated $3.88 billion in revenue, up 25 percent. On a constant currency basis, this growth accelerated to 23 percent from 19 percent in the prior quarter. Professional services revenue grew 9 percent to $110 million.
ServiceNow is attempting to counter the disruption narrative by deeply integrating AI into its own platform. Its AI annual contract value jumped 40 percent sequentially to surpass $1 billion, putting it on track to reach $1.5 trillion by year-end. The company noted its newly launched AI Control Tower is "supercharging" its security and risk operations.
Cybersecurity has emerged as a $1 billion business growing faster than top competitors. Additionally, the company's customer relationship management segment has reached $2 billion in annual contract value, with growth actively accelerating.
Future demand remains robust, as indicated by a 21 percent increase in remaining performance obligations to $29 billion. Current RPO grew 21 percent to $13.2 billion. Looking ahead, the company projects third-quarter subscription revenue of $3.975 billion to $3.98 billion, with current RPO rising 19.5 percent.
Management raised its full-year subscription revenue guidance to a range of $15.76 billion to $15.78 billion, representing 22.5 percent growth. This marks a slight increase from prior guidance of $15.735 billion to $15.775 billion.
