ServiceNow beats Q2 revenue estimates on AI demand, raises FY outlook

Overview

• Enterprise software platform's Q2 revenue rose 24% yr/yr, beating analyst expectations

• Adjusted EPS for Q2 beat analyst expectations

• Company raised full-year subscription revenue outlook on strong demand and AI adoption

Outlook

• ServiceNow raises FY 2026 subscription revenue guidance to $15.76 bln-$15.78 bln

• Company expects Q3 2026 subscription revenues of $3.98 bln at 20.5% y/y growth

• ServiceNow sees FY 2026 subscription gross margin at 81%

Result Drivers

• AI DEMAND - Company said strong demand for ServiceNow AI and agentic deployments contributed to topline growth

• LARGE DEALS - Co reported 123 transactions over $1 mln in net new annual contract value, up nearly 40% yr/yr

• U.S. FEDERAL DEMAND - Accelerated on-premise subscription revenue due to strong U.S. Federal demand, pulling revenue forward from Q3

Company press release: ID:nBwbFH361a

Key Details

Analyst Coverage

• The current average analyst rating on the shares is "buy" and the breakdown of recommendations is 46 "strong buy" or "buy", 3 "hold" and 2 "sell" or "strong sell"

• The average consensus recommendation for the software peer group is "buy"

• Wall Street's median 12-month price target for ServiceNow Inc is $140.00, about 37.2% above its July 21 closing price of $102.06

• The stock recently traded at 22 times the next 12-month earnings vs. a P/E of 24 three months ago

Reuters Recommended Reads

• July 21 - Pegasystems Q2 adjusted EPS misses as AI shifts delay purchases

• July 22 - IBM cuts yearly revenue growth forecast as customers prioritize AI infrastructure spending

• July 22 - Google quarterly cloud revenue growth beats expectations

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(This story was created using Reuters automation and AI based on LSEG and company data. It was checked and edited by a Reuters journalist prior to publication.)