BusinessJul 22, 2026
ServiceNow Reports Revenue Beat Amid Expanding AI Agent Adoption
Enterprise Software
Rhea Lobo
Discover
The enterprise AI spending cycle is still gaining momentum. ServiceNow reported Q2 subscription revenue of $3.88B, up 24.5% year-over-year, beating Wall Street's consensus.
Total revenue reached surged 24% on the year while adjusted earnings per share came in at 90 cents, ahead of analyst projections.
The company's AI business crossed $1B in annual contract value during the quarter. Customers with AI agent deployments in production increased ninefold over the past nine months. ServiceNow also signed 123 deals worth more than $1M in net new annual contract value, up nearly 40% year-over-year.
ServiceNow has been expanding into cybersecurity, recently acquiring security firms Armis and Veza. The company now manages over 7B devices in real time. CEO Bill McDermott framed that push in stark terms.
"The attack surface is exploding. Every ungoverned asset and identity is multiplying the blast radius of AI exponentially."
Bill McDermott, ServiceNow
The $7.8B Armis acquisition closed in April and has weighed on operating margins, which came in at 29.5% for Q2. Management guided for Q3 operating margin of 31%.
ServiceNow is positioning its AI Control Tower as the central product for enterprises trying to govern AI agents across different cloud and IT systems. The company anticipates over 2.2B agents will participate in the global economy in coming years, all needing governance and tracking.
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Remaining performance obligations reached $29B while current remaining performance obligations hit $13.2B, representing 21% year-over-year growth.
The beat came on a difficult day for software stocks broadly. ServiceNow's shares have fallen ~50% over the past year amid fears that AI agents could replace enterprise software functions. ServiceNow's IT service management tools, which bill by the user, sit squarely in the crosshairs of that concern.
On the same morning as ServiceNow's earnings, OpenAI unveiled Presence, a new offering designed to help companies deploy AI agents for tasks like IT service requests and customer support.
ServiceNow's response has been to reframe itself as the orchestration and governance layer on top of AI, not a platform that AI can simply replace. Management raised its full-year subscription revenue outlook to a range of $15.76B to $15.78B.
McDermott said the company saved $1B in internal costs by deploying its own autonomous workflow tools, keeping headcount flat while reinvesting those savings into product development.
