For many of 2026, ServiceNow has been Exhibit A for the “SaaSpocalypse”—the worry that autonomous AI brokers will let firms construct their very own workflows and intestine demand for conventional enterprise software program.
The inventory entered Wednesday down roughly a 3rd for the 12 months and about 50% off its 52-week excessive, at the same time as income stored climbing north of 20%. ServiceNow CEO Invoice McDermott stored saying his firm was “the enterprise gateway for agentic AI,” and he stored exhibiting spectacular development figures to show it. However the market simply wasn’t shopping for.
Throughout Wednesday’s common buying and selling session, earlier than ServiceNow introduced its second quarter earnings, shares fell one other 6.5% following a report that OpenAI deliberate to construct an enterprise product, referred to as Presence, designed to weave AI brokers into the inner equipment of enormous organizations—exactly the territory ServiceNow has staked out with its AI Management Tower product.
However then ServiceNow launched its numbers. And, maybe lastly, merchants determined McDermott was not simply blowing smoke. Shares jumped as a lot as 7% in after-hours buying and selling, wiping out the regular-session decline earlier than paring the features barely.
“We’re who we stated we had been,” McDermott instructed Fortune in an interview Wednesday, performed hours earlier than the outcomes had been made public. “We’ve turn into the agentic entrance door to the enterprise, and we’re managing the whole lot for our prospects from workflow to cybersecurity.”
ServiceNow reported second-quarter subscription income of $3.88 billion, up 24.5% 12 months over 12 months, and whole income simply shy of $4 billion, up 24%. Each beat the excessive finish of the corporate’s personal steerage.
Adjusted earnings got here in at 90 cents per share, forward of the roughly 86 cents Wall Road analysts anticipated. The corporate raised its full-year subscription-revenue steerage to a spread of $15.76 billion to $15.78 billion.
Present remaining efficiency obligations—a metric carefully watched by buyers that measures income that prospects have already contracted for and which ServiceNow will ship within the subsequent 12 months—rose 21%, to $13.2 billion. Whole remaining efficiency obligations reached $29 billion, additionally up 21%.
ServiceNow’s AI merchandise crossed $1 billion in annual contract worth for the primary time, a threshold McDermott has been promising for a 12 months; the corporate says agentic deployments have grown ninefold in 9 months. It closed 123 offers value greater than $1 million in internet new annual contract worth, up practically 40% from a 12 months earlier. The corporate’s non-GAAP working margin held at 29.5%. Administration reiterated its long-term targets: $30 billion-plus in subscription income and a “Rule of 60” by 2030. (“Rule of 60” implies that ServiceNow’s income development price added to its earnings margin would equal or exceed 60. Buyers historically anticipated enterprise software program firms to function with a “Rule of 40.” McDermott stated ServiceNow is at the moment working at a “Rule of 56.”)
More and more, McDermott sees cybersecurity as ServiceNow’s key enterprise gross sales driver. He claims ServiceNow, bolstered by its acquisitions of Armis and Veza, has turn into “the quickest rising cybersecurity firm in enterprise software program” and the eighth-largest cybersecurity firm general.
“The assault floor is exploding due to AI,” he stated, arguing that each ungoverned agent and machine id widens the “blast radius” firms should police. His pitch is that after prospects purchase the management tower to manipulate their AI brokers, the remainder of ServiceNow’s platform follows: “Everyone goes to wish our management tower, and so I count on that to promote like hotcakes.”
Notably, McDermott declined to hitch fellow enterprise-software CEOs, comparable to Microsoft’s Satya Nadella and Palantir’s Alex Karp, who’ve been warning prospects away from reliance on AI fashions from frontier AI labs over claims that the businesses mine buyer information to construct competing merchandise. “I’m not agreeing with that narrative. I really absolutely assist the frontier fashions,” McDermott stated, framing ServiceNow as a substitute as their distribution channel into the enterprise.
“AI thinks, however workflow acts,” he stated. Corporations gained’t “guess a enterprise course of on ‘in all probability it’s proper,’” he argued, and most enterprise AI runs on cheaper, domain-specific fashions anyway: “We don’t want Lamborghinis to ship the mail.”
The open query is whether or not Wednesday’s beat and share value bounce is only a blip, or the catalyst that convinces buyers to offer the inventory a extra sturdy re-rating. McDermott has been placing sturdy numbers on the board for greater than a 12 months with out a lot reward. “Innovating for the enterprise, it’s loads like politics—it’s simple to make noise, very arduous to make progress,” he stated, casting the quarter as one other entry in “seven years of defying all of the naysayers.”
Some skeptics aren’t absolutely satisfied. Bears proceed to flag the corporate’s wealthy valuation—the corporate trades at a trailing price-to-earnings ratio of near 60—and considerations in regards to the pricing of ServiceNow’s merchandise. Some analysts warned that the corporate’s July 1 pricing change pulled renewals ahead, probably borrowing backlog energy from later quarters. ServiceNow itself acknowledged that a part of the income beat got here from on-premise offers—pushed by sturdy U.S. federal demand—that landed within the second quarter somewhat than the third.
However the after-hours transfer suggests buyers are keen to entertain the concept that ServiceNow as a winner of the agentic AI period, somewhat than a sufferer.
