ServiceNow shares rise after earnings beat eases AI software fears

ServiceNow shares rose in after-hours trading Wednesday after the enterprise software company topped second-quarter expectations and lifted its full-year subscription revenue forecast. The results mattered because investors had been questioning whether AI agents would reduce demand for software platforms such as ServiceNow, Fortune reported.

According to Fortune, ServiceNow had become a prominent example of Wall Street anxiety over software-as-a-service companies in 2026. Its stock had entered Wednesday down about one-third for the year and roughly 50% below its 52-week high, even as the company continued to post revenue growth above 20%.

The stock fell 6.5% during the regular session Wednesday before the earnings release, Fortune reported. That drop followed a report that OpenAI was preparing an enterprise product called Presence, aimed at embedding AI agents inside large companies, an area ServiceNow has targeted with its AI Control Tower product.

After ServiceNow released its results, the shares climbed as much as 7% in extended trading, according to Fortune, erasing the regular-session loss before giving back part of the gain.

ServiceNow reported second-quarter subscription revenue of $3.88 billion, up 24.5% from a year earlier, Fortune reported. Total revenue was just under $4 billion, up 24%, and both figures came in above the high end of the company’s own forecast.

The company posted adjusted earnings of 90 cents a share, ahead of the roughly 86 cents expected by Wall Street analysts, according to Fortune. ServiceNow also raised its full-year subscription revenue outlook to between $15.76 billion and $15.78 billion.

Current remaining performance obligations, a measure of contracted revenue expected over the next 12 months, rose 21% to $13.2 billion, Fortune reported. Total remaining performance obligations also increased 21%, reaching $29 billion.

Fortune reported that ServiceNow’s AI products passed $1 billion in annual contract value for the first time, a milestone Chief Executive Bill McDermott had been forecasting for a year. The company said deployments involving AI agents grew ninefold over nine months.

ServiceNow closed 123 deals with more than $1 million in net new annual contract value, up nearly 40% from a year earlier, according to Fortune. Its non-GAAP operating margin was 29.5%.

Management repeated its longer-term goals, Fortune reported, including more than $30 billion in subscription revenue by 2030 and a “Rule of 60,” a software-industry measure combining revenue growth and profit margin. McDermott told Fortune the company is currently at a “Rule of 56.”

McDermott told Fortune that ServiceNow has become “the agentic front door to the enterprise,” saying the company manages customer needs from workflow to cybersecurity. He also said cybersecurity is becoming a central sales driver for the company, citing the acquisitions of Armis and Veza.

McDermott argued to Fortune that AI is expanding corporate security risks by adding unmanaged agents and machine identities. His view is that demand for ServiceNow’s control tower to oversee AI agents can pull customers deeper into the company’s broader platform.

Fortune reported that McDermott did not echo warnings from some other enterprise software leaders who have cautioned customers about relying on AI models from frontier labs. McDermott said he supports those models and views ServiceNow as a way to bring them into large companies.

Investor doubts remain, according to Fortune. Bears point to ServiceNow’s valuation, with a trailing price-to-earnings ratio near 60, and to concerns about product pricing. Some analysts also warned that a July 1 pricing change may have moved renewals into the quarter earlier than they otherwise would have occurred.

ServiceNow acknowledged that part of the revenue beat came from on-premise deals tied to strong U.S. federal demand that closed in the second quarter rather than the third, Fortune reported. Still, the after-hours move suggested investors were more willing to consider McDermott’s case that ServiceNow can benefit from the rise of AI agents.

This story draws on original reporting from Fortune.