ServiceNow raises annual subscription revenue forecast again on AI-driven demand
Bill McDermott, chairman and CEO of ServiceNow, speaks during an interview on the floor at the New York Stock Exchange (NYSE) in New York City, U.S., October 26, 2023. REUTERS/Brendan McDermid
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July 22 : ServiceNow on Wednesday raised its forecast for annual subscription revenue for the second time after beating second-quarter revenue and profit estimates, driven by growing demand for its AI-powered software.
Shares of ServiceNow rose over 5 per cent in volatile extended trading. They have fallen about 37 per cent so far this year.
The results come as software giants are grappling with concerns of a “SaaSpocalypse” – a term reflecting the gloom around software-as-a-service companies amid growing capabilities of new AI tools provided by startups like OpenAI and Anthropic.
But ServiceNow is expanding its AI agent portfolio across domains like IT and customer service, helping enterprise clients to automate complex, time-consuming workflows.
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Earlier this year, ServiceNow launched Otto, an AI experience designed to handle requests from employees and complete complex cross-department workflows. It also enhanced its capabilities by acquiring cybersecurity startup Armis and AI startup Moveworks.
ServiceNow said its AI platform has seen widespread adoption across the public sector, with nearly all 50 U.S. states now using it to improve citizen services and modernize operations.
The company now expects full-year 2026 subscription revenue of $15.760 billion to $15.780 billion, up from its earlier projection of $15.735 billion to $15.775 billion.
Second-quarter subscription revenue of $3.88 billion and adjusted profit per share of 90 cents exceeded LSEG-compiled analysts’ average estimates of $3.82 billion and 85 cents, respectively.
However, the company’s forecast for third-quarter subscription revenue of $3.975 billion to $3.980 billion came in below the average estimate of about $4 billion.
ServiceNow said its current remaining performance obligations, contract revenue expected to be recognized within the next 12 months, hit $13.20 billion as of June 30, a 21 per cent increase from a year earlier.
“Our $29 billion in remaining performance obligations is fueled by longer customer commitments and skyrocketing demand from our partner ecosystem,” CEO Bill McDermott said in a statement.
Source: Reuters
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