Key Highlights
- ServiceNow exceeded Q2 2026 projections with adjusted earnings per share of $0.90 compared to the $0.86 analyst consensus and revenue of $3.99B versus $3.93B anticipated
- Subscription-based revenue climbed 23% from the prior year in constant currency, reaching $3.877B
- Artificial intelligence annual contract value exceeded $1B, surpassing the company’s internal projections
- Full-year subscription revenue outlook increased to a range of $15.755B–$15.770B
- Shares declined 6.47% to $95.46 during standard market hours, then rebounded 4.75% in extended trading to $99.99
ServiceNow delivered financial results that topped analyst predictions for both revenue and profitability in its second quarter of 2026, yet the stock experienced a significant decline during regular market hours before staging a partial recovery once after-hours trading commenced.
The enterprise software provider posted adjusted earnings per share of $0.90, surpassing the Street consensus of $0.86. Total revenue registered at $3.99 billion, exceeding analyst expectations of $3.93 billion. Subscription-based revenue totaled $3.877 billion, representing a 23% increase year-over-year when measured in constant currency terms.
The stock finished the regular trading session at $95.46, representing a 6.47% decline from the previous close of $102.06. Following the earnings announcement, shares jumped 4.75% during after-hours activity to reach $99.99 — though this still left the stock approximately 2% below where it had closed the day before.
The company’s non-GAAP operating margin registered at 29.5%, exceeding internal guidance by 300 basis points. Free cash flow margin for the three-month period stood at 16%.
Total remaining performance obligations reached $29 billion, marking a 22% increase in constant currency. Current RPO measured $13.2 billion, up 21.5% from the comparable period.
Artificial Intelligence Growth Accelerates
The company’s AI-related annual contract value surpassed the $1 billion threshold during the quarter, positioning ServiceNow ahead of schedule toward its $1.5 billion target for year-end 2026. Company leadership also confirmed they remain on course for AI to constitute 30% of total ACV by the year 2030.
Recently launched AI offerings include Level 1 ITSM AI specialists, which are currently resolving between 80% and 85% of service requests without requiring human intervention. The company’s AI-native product offerings command premium pricing of 20% to 30% compared to traditional solutions.
ServiceNow also showcased its AI Control Tower solution, which manages governance across multiple AI agents, and emphasized expanding partnerships with Microsoft, NVIDIA and Accenture.
Chief Executive Officer Bill McDermott stated the company sits “in the bullseye of AI, cybersecurity, workflow orchestration, integration, and automation.” Chief Financial Officer Gina Mastantuono emphasized that customers are purchasing “resolutions,” not computational tokens.
Outlook Elevated With Measured Optimism
ServiceNow increased its full-year 2026 subscription revenue forecast to a range of $15.755B–$15.770B, suggesting 21% growth in constant-currency terms. The company maintained its full-year operating margin projection at 31.5%, with free cash flow margin expected to reach 35%.
Looking to the third quarter, management provided subscription revenue guidance of $3.975B–$3.980B, representing 20% constant-currency growth, with an operating margin target of 31%.
Company executives acknowledged that a portion of Q2’s outperformance resulted from U.S. federal government contracts that accelerated revenue recognition from the third quarter into the second. Leadership clarified this represented only part of the story, highlighting net new ACV that significantly exceeded internal forecasts.
Gross margin headwinds stemming from hyperscaler partnerships and AI consumption patterns remain an area of focus. Trading at a P/E ratio of 57 and a PEG ratio of 4.34, the stock offers minimal cushion for execution missteps.
Jefferies analyst Samad Samana increased his price objective on NOW to $140 from $135 after reviewing the quarterly results, maintaining his Buy rating. He highlighted impressive performance on constant currency cRPO, subscription revenue, and operating margin, noting that the Q3 cRPO guidance demonstrates solid fundamental business momentum.
NOW stock has traded between $81.24 and $210.20 over the past 52 weeks.
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