ServiceNow shares are surging in premarket trading Thursday after the company delivered a strong second-quarter earnings report that beat expectations on nearly every metric. The stock was up about 7.5% at $102.58 as of Thursday morning.
The company reported adjusted earnings per share of $0.90, topping the Street's estimate of $0.85. Revenue came in at $3.99 billion, also ahead of the analyst consensus of $3.93 billion. Subscription revenue rose 24.5% year-over-year to $3.88 billion, which was 1.5 percentage points above the company's own guidance.
ServiceNow's remaining performance obligations (RPO) — a key metric for future revenue — hit nearly $29 billion, up 21% year-over-year. Current RPO, which represents work expected to be recognized as revenue over the next 12 months, increased 21% to $13.2 billion.
The adjusted operating margin came in at 29.5%, a full 300 basis points above guidance, thanks to a combination of revenue outperformance and cost discipline.
AI Adoption Accelerates
The big story this quarter was artificial intelligence. ServiceNow's AI annual contract value crossed the $1 billion milestone, putting the company well on track to hit its $1.5 billion target for 2026. AI net new ACV grew more than 40% sequentially, and deals involving five or more AI products jumped 5.5 times year-over-year. The number of customers deploying agentic AI in production rose ninefold over the past nine months.
Overall, ServiceNow closed 123 deals worth more than $1 million in net new ACV, up 40% from a year ago. The company ended the quarter with 658 customers generating over $5 million in ACV, including 32 additional customers above the $20 million threshold. Renewal rates remained strong at 98%, signaling that customers are sticking around and expanding their usage.
Cybersecurity also crossed the $1 billion revenue mark, boosted by acquisitions like Armis and Veza.
Outlook Raised
ServiceNow raised the midpoint of its fiscal year 2026 subscription revenue guidance by $15 million to approximately $15.77 billion, which implies 21% year-over-year growth. The company cited strong demand from U.S. federal customers and accelerating AI adoption as key drivers.
For the third quarter of 2026, ServiceNow expects subscription revenue between $3.975 billion and $3.980 billion, with current RPO growth of 20% year-over-year in constant currency. The company maintained its expectations for a 31.5% operating margin and 35% free cash flow margin for the full year.
Management also reaffirmed its long-term target of reaching $32 billion in revenue by 2030 while sustaining a Rule of 60+ growth profile — meaning the sum of revenue growth and profit margin should exceed 60%.
ServiceNow executives expressed confidence in the company's outlook. The CEO teased an upcoming announcement around a conversational service desk experience and noted that cybersecurity has grown into a 10-figure business.
New Partnerships
In a separate announcement Thursday, ServiceNow expanded its partnership with Experian to accelerate enterprise AI adoption. The collaboration will integrate Experian's Ascend Platform with the ServiceNow AI Platform, embedding Experian's data, insights, and decisioning capabilities into ServiceNow workflows. This should enable AI agents to improve automation in areas like employee onboarding, third-party risk management, and model governance.
ServiceNow also signed a multi-year technology partnership with TeamViewer to integrate TeamViewer's Digital Employee Experience and Remote Connectivity solutions with the ServiceNow AI Platform. The two companies will combine their capabilities to deliver end-to-end autonomous IT solutions, backed by joint go-to-market investments.
With AI adoption accelerating, a raised outlook, and new partnerships in place, ServiceNow is making a strong case that its platform is becoming indispensable for enterprises navigating the AI transformation.
