ServiceNow has lifted its annual subscription revenue forecast again, giving the enterprise software market another sign that companies are still willing to spend heavily on artificial intelligence.
The company reported stronger-than-expected second-quarter results, helped by larger customer contracts, demand from the United States federal government and growing adoption of its AI products.
There is plenty of noise around enterprise AI right now. Some software companies worry that generative AI will replace parts of their platforms. ServiceNow is making a different bet.
It wants to become the system businesses use to manage all those AI tools.
ServiceNow Subscription Revenue Climbs Nearly 25%
ServiceNow generated $3.88 billion in subscription revenue during the second quarter of 2026, an increase of 24.5% from the same period last year. Growth reached 23% when currency movements were excluded. Total quarterly revenue rose 24% to approximately $3.99 billion.
Those numbers came in above the company’s earlier guidance and ahead of many analyst expectations.
ServiceNow now expects full-year subscription revenue of between $15.76 billion and $15.78 billion. Its previous forecast ranged from $15.74 billion to $15.78 billion, meaning the company raised the lower end while keeping the top unchanged.
It is a small adjustment on paper. The timing makes it more interesting.
Enterprise software stocks have faced growing questions about whether customers will replace conventional workflow platforms with cheaper AI agents. ServiceNow’s latest results suggest that large organizations are not rushing to tear out their existing systems. Many are adding AI on top of them instead.
AI Products Pass a Major Revenue Milestone
ServiceNow said its AI business crossed $1 billion in annual contract value during the quarter. That is a meaningful milestone for a product category that was still largely experimental inside many companies not long ago.
The company has been placing generative AI and autonomous agents across its workflow platform. These systems can summarize cases, route tasks, answer employee questions and automate repetitive processes across IT, customer service, human resources and security operations.
Not every deployment is dramatic. Some simply remove a few manual steps from a process that employees previously hated doing.
That is often where enterprise AI becomes useful first.
ServiceNow also says the number of customers running live AI agent deployments has increased ninefold over the past nine months. Its pitch is shifting beyond selling individual AI assistants. The company wants its platform to coordinate different agents, models and business systems from one place.
ServiceNow Wants to Be the Control Layer for AI
ServiceNow has described itself as an “AI control tower” for businesses.
The phrase sounds like marketing, obviously. The strategy behind it is fairly practical.
Large companies are starting to use AI models from several providers. They may also build internal agents, buy specialized tools and connect those products to sensitive corporate data. Someone still needs to track what those systems can access, which tasks they perform and whether they follow company rules.
ServiceNow wants that management layer to run through its platform.
Its AI Control Tower product gives organizations a central place to monitor AI models, agents, workflows and related risks. The company is betting that AI expansion will create more complexity rather than eliminate the need for enterprise software.
That may be ServiceNow’s strongest argument against disruption. More AI does not automatically mean fewer platforms. In many cases, it creates a need for another platform to keep everything under control.
Larger Contracts Strengthen ServiceNow’s Outlook
ServiceNow recorded 123 transactions with an annual contract value above $1 million during the quarter. That represented growth of nearly 40% from a year earlier.
Large deals matter because they tend to involve several ServiceNow products rather than one isolated application. A customer might begin with IT service management, then expand into security, employee workflows, customer operations and AI governance.
The company ended the quarter with $13.2 billion in current remaining performance obligations, up 21% year over year. Total remaining performance obligations reached $29 billion, also increasing 21%. These figures represent contracted revenue that ServiceNow expects to recognize in future periods.
Its subscription renewal rate remained at 98%, suggesting that existing customers are largely staying with the platform even as companies review their software costs.
Federal Demand Gives the Quarter an Extra Push
Demand from the US federal government also helped ServiceNow’s second-quarter performance.
Government agencies have been modernizing older IT systems while exploring AI for administrative work, cybersecurity and service delivery. ServiceNow benefited from some federal customers accelerating on-premise subscription activity during the quarter.
That contribution may not repeat at exactly the same level every quarter. Still, federal contracts tend to be valuable because government systems are difficult to replace once deployed.
The public sector has also become an important testing ground for AI governance. Agencies want automation, but they need controls around security, data access and accountability. Those requirements fit neatly with ServiceNow’s control-tower strategy.
Third-Quarter Guidance Leaves Some Caution
The results were strong, though the outlook was not perfect across every measure.
ServiceNow expects third-quarter subscription revenue of roughly $3.98 billion. That came in slightly below some Wall Street forecasts of around $4.01 billion.
The company is also absorbing costs linked to its expansion into cybersecurity, including its acquisition of Armis. Those investments may place pressure on margins in the near term.
None of that changes the broader direction of the quarter.
ServiceNow is growing above 20%, closing more large contracts and generating a meaningful amount of business from AI. That is a much healthier position than simply attaching an AI chatbot to an existing platform and hoping customers pay extra.
Enterprise AI Spending Is Moving Into Operations
The ServiceNow results show how enterprise AI spending is changing.
Early demand focused heavily on experiments. Companies paid for pilot programs, employee assistants and small demonstrations designed to prove that generative AI could do something useful.
Now the conversation is moving toward operations.
Businesses want AI that connects with existing systems, follows internal rules and produces measurable outcomes. They also want tools that can manage AI deployments before they become another uncontrolled layer of corporate technology.
ServiceNow already sits inside many of those workflows. That gives it an advantage, but not a guaranteed one.
Microsoft, Salesforce, Oracle and a growing group of AI-native companies are chasing the same opportunity. Customers will not keep paying for overlapping agents forever. Eventually, they will decide which platforms actually remove work and which ones merely create more dashboards.
For the moment, ServiceNow has enough demand to raise its annual forecast again.
That says more than another carefully scripted AI announcement ever could.
Sources
- Reuters: ServiceNow raises annual subscription revenue forecast again on AI-driven demand
- ServiceNow: ServiceNow Reports Second Quarter 2026 Financial Results
- The Wall Street Journal: ServiceNow Second-Quarter Sales Rise on Higher Contract Values