ServiceNow raises annual subscription revenue forecast again on AI-driven demand

ServiceNow on Wednesday boosted its annual subscription revenue forecast for the second time this year, after its second-quarter financial results surpassed analyst expectations. The company's shares saw a volatile rise of over 5% in extended trading, though they remain down about 37% year-to-date.

The software-as-a-service sector has faced concerns about a "SaaSpocalypse" due to the rise of AI startups like OpenAI and Anthropic. However, ServiceNow is leveraging AI to enhance its offerings. The company is expanding its AI agent portfolio to automate complex workflows in IT and customer service. Earlier this year, it launched Otto, an AI experience for employee requests, and bolstered its capabilities through acquisitions of cybersecurity firm Armis and AI startup Moveworks.

ServiceNow highlighted strong AI platform adoption in the public sector, with nearly all U.S. states utilizing its services for citizen engagement and operational modernization. The company now projects full-year 2026 subscription revenue between $15.760 billion and $15.780 billion, an increase from its previous guidance. Second-quarter subscription revenue reached $3.88 billion, with adjusted profit per share at 90 cents, both exceeding LSEG-compiled analyst estimates. However, the forecast for third-quarter subscription revenue, between $3.975 billion and $3.980 billion, fell slightly short of the approximate $4 billion average estimate.

Despite the mixed short-term outlook, ServiceNow reported that its remaining performance obligations, contract revenue expected within 12 months, reached $13.20 billion as of June 30, a 21% increase from the previous year. CEO Bill McDermott stated that the company's $29 billion in remaining performance obligations is driven by longer customer commitments and surging demand from its partner ecosystem.

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Our $29 billion in remaining performance obligations is fueled by longer customer commitments and skyrocketing demand from our partner ecosystem.