ServiceNow Raises Annual Subscription Revenue Forecast Again After Strong Demand for AI Services
Software maker ServiceNow raises annual subscription revenue guidance after another quarter of earnings that beat expectations as businesses increase demand for AI-powered software at the enterprise level. The company raised its full-year outlook for the second time in 2026, citing strong revenue growth, improved profitability, and continued expansion of large customer contracts. The update adds to confidence that spending on AI is becoming a big driver of expenditure on corporate software.
ServiceNow Financial Outlook Gets a Boost from AI Adoption
ServiceNow subscription revenue in the second quarter was $3.877 billion, a 24.5% increase over the year-ago period. Total revenue was $3.987 billion, up 24% from the year-ago period. The business boosted its full-year subscription revenue outlook to between $15.76 billion and $15.78 billion from its prior expectation of $15.63 billion to $15.68 billion. Management attributed the improved prognosis to strong demand for AI-enabled workflow automation and better-than-expected client spending.
The company also stated its AI yearly contract value has now topped $1 billion, showing strong adoption of its AI platform by enterprise customers. Executives said the quarterly performance were aided by additional AI installations and public sector customers.
Strong Earnings Growth and Growing Enterprise Business
Adjusted earnings per share were $0.90, beating forecasts of analysts. Total outstanding performance obligations were $29 billion, while current remaining performance obligations (cRPO), a leading predictor of future revenue, climbed 21% to $13.2 billion.
ServiceNow also inked 123 corporate deals in the quarter with annual contract value of over $1 million, demonstrating the continued appetite from large businesses. “Even though we are seeing a year-over-year decline in GAAP net income, our key long-term growth drivers remain increasing adoption of AI and growing recurring subscription revenue.
Results Welcome ServiceNow Investors
The stock rose approximately 4% in after-hours trading on the back of the earnings announcement, which investors welcomed. The results helped assuage fears that generative AI may upend established software companies, proving that ServiceNow is profiting from the deployment of AI rather than being supplanted by newer competitors.
Analysts also noted sustained strength in cybersecurity, workflow automation and government contracts, while some thought the third-quarter subscription revenue projection was somewhat below Wall Street expectations. But the better full-year guidance did assist boost confidence in the company’s success.
What ServiceNow investors should watch for next
Now the question for investors is whether ServiceNow can keep up its lofty AI growth while keeping margin expansion steady. We expect long-term growth to be driven by increasing AI usage, increased hyperscaler collaborations and continued enterprise demand with FX headwinds and timing of government contracts potentially causing quarterly variances.
Sources
ServiceNow – Quarterly financial metrics, customer growth, million dollar deals, AI platform adoption, profitability trends and business outlook.
Reuters – Raised revenue guidance, AI demand, adjusted EPS, after-hours stock move, market response and management commentary
The Wall Street Journal – Revenue growth, enterprise contract trends, large customer deals, subscription guidance and software industry analysis.
MarketWatch – AI use, cybersecurity business momentum, stock performance, investor mood
Bloomberg – Earnings analysis, prognosis for value, trends in enterprise AI spending and what analysts expect.
CNBC – Quarterly earnings, Wall Street expectations, investor reaction, and growth analysis powered by AI.
