ServiceNow, Inc.
NOW · NYSE
Next quarter
Expected to report Oct 28, 2026 — estimated from last year’s reporting date.
Consensus is $0.57 EPS for Sep 2026 across 12 estimates, ranging $0.44 to $0.74.
NOW Jun 2026
- 22.50%
- -3.69%
- $0.40
- $0.31
- —
- $3.99B
Reported results
- $3.99B
- 70.68%
- $162.00M
- 4.06%
- $298.00M
- $0.29
Highlights
- Topline: Q2 revenue was $3.99 billion, up 24% year over year and 5.8% from Q1; subscription revenue reached $3.88 billion, up 24.5% year over year.
- Demand: Current remaining performance obligations rose 21% year over year to $13.20 billion, while total RPO reached $29.0 billion; 46% of RPO is expected to convert over the next 12 months.
- AI traction: ServiceNow AI crossed $1 billion in annual contract value, while agentic deployments increased ninefold in nine months.
- Enterprise expansion: The company recorded 123 transactions above $1 million of net new ACV, up nearly 40% year over year, and ended with 658 customers above $5 million of ACV, up approximately 23%.
- GAAP earnings: Diluted EPS was $0.29, below the $0.40 consensus estimate by 22.5%, versus $0.37 a year ago and $0.45 in Q1.
- Acquisition drag: GAAP operating margin fell to 4% from 11% a year ago and 13% in Q1, reflecting acquisition-related amortization, stock-based compensation and other costs; non-GAAP operating margin was 29.5%.
- Cash generation: Non-GAAP free cash flow was $634 million, or a 16% margin, versus $535 million and a 16.5% margin a year ago.
- Outlook: ServiceNow raised full-year 2026 subscription revenue guidance to $15.76-$15.78 billion, implying 22.5% reported growth and 21% constant-currency growth; Q3 subscription revenue guidance is $3.975-$3.980 billion.
Analysis
ServiceNow’s Q2 was a strong demand and bookings quarter beneath a weak GAAP earnings headline. Revenue of $3.99 billion grew 24% year over year and 5.8% sequentially, beating the company’s high end of guidance across topline and profitability measures, while subscription revenue increased 24.5% to $3.88 billion. The result was ahead of the prior-year $3.21 billion and Q1’s $3.77 billion, but diluted EPS of $0.29 missed the $0.40 consensus estimate by 22.5%; it compared with $0.37 a year ago and $0.45 in Q1.
The print was defined by durable contract momentum, rapid AI commercialization and the cost of acquisitions. cRPO grew 21% to $13.20 billion and total RPO reached $29.0 billion, while ServiceNow AI surpassed $1 billion in ACV. However, Armis and Veza added substantial amortization and integration costs: GAAP operating income fell to $162 million from $358 million a year ago and $503 million in Q1, despite non-GAAP operating income rising 23% year over year to $1.17 billion. Management raised full-year subscription revenue guidance to $15.76-$15.78 billion, although the company expects continued pressure on gross margin from hyperscaler usage, AI adoption and acquired intangibles.
Subscription demand
ServiceNow’s core subscription engine continued to grow at an enterprise-software-leading pace. Subscription revenue increased 24.5% year over year to $3.877 billion, or 23% in constant currency, and represented 97% of total revenue. Management attributed the outperformance to stronger net new ACV and a higher-than-expected mix of on-premise revenue, particularly from U.S. federal customers. Some revenue was pulled forward from Q3, making the timing benefit relevant to the next quarter’s comparison.
- Large deals: The company completed 123 transactions above $1 million of net new ACV, nearly 40% more than a year ago.
- Customer depth: Customers with more than $5 million of ACV increased approximately 23% year over year to 658, while the renewal rate remained 98%.
- Backlog: cRPO grew 21% to $13.20 billion and total RPO grew 21% to $29.0 billion; approximately 46% of RPO is expected to be recognized within 12 months.
- Geography: North American revenue rose 26% year over year to $2.52 billion, EMEA increased 20% to $997 million and Asia Pacific and other grew 25% to $468 million.
AI monetisation
AI moved further from product positioning toward measurable commercial traction. ServiceNow AI crossed $1 billion in annual contract value in Q2, and management said agentic deployments had increased ninefold in nine months. The company is positioning Otto, AI Control Tower, AI specialists and Action Fabric as a governed layer connecting enterprise data, third-party models and workflows. The quarter also brought expanded integrations with NVIDIA, Microsoft, AWS, Anthropic and developer tools including Cursor, Windsurf, Claude Code and GitHub Copilot.
- Platform strategy: Otto combines Now Assist, Moveworks and AI Experience to route and execute work across departments and systems.
- Security opportunity: AI Control Tower and the new Autonomous Security & Risk specialist combine ServiceNow capabilities with Armis and Veza assets to govern agents, identities and connected devices.
- Commercial test: Management said AI net new ACV growth continued to exceed expectations, but the release did not disclose AI revenue or margin separately.
Acquisition economics
The Armis and Veza acquisitions materially changed the cost structure and balance sheet during the quarter. ServiceNow acquired Armis for approximately $7.6 billion in cash on April 20 and Veza for approximately $1.2 billion on March 2. The deals add security, cyber-exposure management and identity capabilities, but their acquired intangible assets produced a much larger amortization burden immediately.
- GAAP burden: Amortization of purchased intangibles was $177 million in cost of revenues and $219 million in operating expenses in Q2, versus $23 million and $25 million, respectively, a year earlier.
- Operating margin: GAAP operating income was $162 million, down 55% year over year, with a 4% margin versus 11% a year ago; stock-based compensation was $655 million, or 16.5% of revenue.
- Underlying result: Non-GAAP operating income rose 23% year over year to $1.173 billion, with a 29.5% margin, unchanged from the prior-year quarter.
- Balance sheet: Goodwill increased to $9.84 billion from $3.58 billion at year-end, while net intangible assets rose to $3.78 billion from $1.12 billion.
Cash and financing
Cash generation remained positive, but acquisition funding drove a sharp increase in leverage and investing outflows. Six-month operating cash flow was $2.26 billion versus $2.39 billion a year ago, while non-GAAP free cash flow increased 14% to $2.30 billion. Q2 free cash flow was $634 million, up from $535 million a year ago, despite a lower margin.
- Acquisition spending: Cash used in business combinations was $7.45 billion in Q2 and $8.78 billion in the first half, primarily reflecting Armis and Veza.
- Debt raised: ServiceNow issued $4.0 billion of senior notes in May and ended Q2 with $5.44 billion of long-term debt plus $2.08 billion of commercial paper.
- Liquidity: Cash, cash equivalents and marketable securities totaled $6.7 billion, and the company had an undrawn $3.0 billion revolving credit facility.
- Capital return: The company repurchased no shares in Q2; first-half repurchases totaled $2.225 billion, leaving approximately $4.2 billion available under the authorization.
Raised outlook
ServiceNow raised its full-year subscription revenue outlook on stronger net new ACV, while flagging a more demanding margin profile. The company expects higher hyperscaler usage, accelerating AI adoption and acquired-intangible amortization to weigh on gross margin even as sales and marketing leverage improves.
- Full year: Subscription revenue guidance is $15.760-$15.780 billion, representing 22.5% reported growth and 21% constant-currency growth.
- Profitability: Full-year guidance calls for 81% non-GAAP subscription gross margin, 31.5% non-GAAP operating margin and 35% free cash flow margin.
- Next quarter: Q3 subscription revenue is guided to $3.975-$3.980 billion, with 20.5% reported growth and 20% constant-currency growth; cRPO growth is expected at 19.5% reported and 20% constant currency.
- Foreign exchange: Management estimates an approximately $35 million year-over-year FX headwind to Q3 cRPO.
