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    NOW
    Earnings call· Jun 2026(Q2 FY26)

    ServiceNow, Inc. NOW

    Jul 22, 2026 Source

    Executive summary

    ServiceNow Q2 FY26 — Strong AI ACV Growth and Cybersecurity Momentum

    ServiceNow delivered a strong quarter, driven by robust AI adoption and significant traction in its cybersecurity offerings, positioning itself as the AI Control Tower for enterprise transformation. The company emphasized its role in deploying AI securely across diverse enterprise environments, leveraging its platform for workflow orchestration and integration. Management reiterated confidence in its growth trajectory and operating leverage, despite minor short-term gross margin pressures.

    Highlights

    6

    • Subscription revenue grew 23% in constant currency, 1.5 points above the high end of guidance.

    • Current RPO (cRPO) grew 21.5% in constant currency, more than 2 points above guidance.

    • Non-GAAP operating margin reached 29.5%, 3 points above guidance.

    • ServiceNow AI ACV surpassed $1 billion, tracking ahead of the $1.5 billion target by end of 2026.

    • The company closed 123 deals greater than $1 million in net new ACV, up 40% year-over-year.

    • The renewal rate remained strong at 98% in Q2.

    Concerns

    2

    • A shift of some on-prem revenue from Q3 to Q2 due to strong U.S. federal demand, impacting Q3 revenue growth.

    • Short-term pressure on gross margin is expected due to increased hyperscaler utilization and accelerating AI adoption.

    Guidance & targets

    9
    CategoryTargetConfidence
    Full-year 2026 Subscription Revenues
    $15.755 billion to $15.770 billion
    high materiality
    High
    Full-year 2026 Subscription Gross Margin
    81%
    medium materiality
    High
    Full-year 2026 Operating Margin
    31.5%
    high materiality
    High
    Full-year 2026 Free Cash Flow Margin
    35%
    high materiality
    High
    Full-year 2026 GAAP Diluted Weighted Average Outstanding Shares
    1.04 billion
    low materiality
    High
    Q3 2026 Subscription Revenues
    $3.975 billion and $3.980 billion
    high materiality
    High
    Q3 2026 cRPO Growth
    20%
    high materiality
    High
    Q3 2026 Operating Margin
    31%
    high materiality
    High
    Q3 2026 GAAP Diluted Weighted Average Outstanding Shares
    1.05 billion
    low materiality
    High

    Segment performance

    7
    SegmentRevenueYoYQoQMargin
    Technology Workflows
    The combination of Armis and Veza had a strong pull effect on the core. ITOM had an outstanding quarter.
    Deals over $1 million: 50Deals over $5 million: 9ITSM presence in top 20 deals: 15ITOM presence in top 20 deals: 18ITOM deals over $1 million: 14Security and risk solutions presence in top 20 deals: 16Security and risk deals over $1 million: 24
    		————
    CRM and Industry Workflows
    Driven by sustained momentum in CPQ and sales and order management.
    Presence in top 20 deals: 16Deals over $1 million: 15
    		————
    Core Business Workflows
    Driven by strong demand for EmployeeWorks.
    Presence in top 20 deals: 12Deals over $1 million: 24
    		————
    Creator Workflows
    Presence in top 20 deals: 18Deals over $1 million: 14
    		————
    Business and Consumer Services Industry
    Led the way in net new ACV growth.
    		—over 6x——
    Education Industry
    Posted impressive growth.
    		—over 125%——
    Telco and Media Industry
    		—nearly 40%——

    Operational metrics

    15
    Subscription revenue growth
    23%YoY
    Q2 FY26
    Non-GAAP operating margin
    29.5%
    Q2 FY26
    Deals over $1 million in net new ACV
    123up 40% YoY
    Q2 FY26
    ServiceNow AI net new ACV growth
    over 40%QoQ
    Q2 FY26

    Accelerating sequentially.

    Deals including 5 or more ServiceNow AI products
    5.5xYoY
    Q2 FY26
    Customers with Agentic AI in production
    9x
    last 9 months

    Leading indicator for future consumption opportunity.

    Deal volume among first-time ServiceNow Agentic AI buyers
    over 45%YoY
    Q2 FY26
    Price uplift for new AI native SKUs
    20% to 30%
    Q2 FY26
    EmployeeWorks deal volume
    over 150%QoQ
    Q2 FY26

    Another good example of acquisitions amplifying the core.

    RaptorDB Pro deal volume
    80%YoY
    Q2 FY26
    Free cash flow margin
    16%
    Q2 FY26
    CRM ACV business
    $2 billion
    Q2 FY26

    ACV growth accelerated year-over-year and quarter-over-quarter.

    Sales CRM average deal size
    doubledYoY
    Q2 FY26
    Service CRM cases
    over 2 billion
    FY26

    Expected to be executed this year.

    Net new business non-seat-based
    50%
    Q2 FY26

    Industry KPIs

    11
    MetricValueDetails
    Revenue growth$3.877 billionUSD
    Arr net new arrover $1 billionUSD
    Rpo current rpo$13.2 billionUSD
    Bookings billings123deals
    Pricing model mix50%%
    Customer account count658customers
    Large deal new logo metrics123deals
    Gross retention renewal rate98%%
    Multi product platform attach18deals
    Operating FCF margin rule of 4029.5%%
    Ai product adoption monetizationover $1 billionUSD

    Orderbook & backlog

    2
    Total RPO~$29 billionQ2 FY26 end

    22% YoY

    Constant currency growth, with an increase in average customer contract duration.

    Current RPO$13.2 billionQ2 FY26 end

    21.5% YoY

    Constant currency growth, 200 basis point beat versus guidance.

    Product announcements

    1
    ProductTypeDetails
    Conversational Service Desk Experiencelaunch

    Deals & partnerships

    22
    MoveworksAcquisition to enhance EmployeeWorks conversational AI capabilities.

    Moveworks conversational AI combined with ServiceNow workflows to create a single place for employee experiences (EmployeeWorks).

    VezaAcquisition to enhance identity and access security.

    Veza maps access across human, machine, and AI identities, integrated into the AI Control Tower for security.

    ArmisAcquisition to enhance cyber physical security and continuous vulnerability detection.

    Armis tracks connected devices in real time, integrated into the AI Control Tower for security, especially for critical infrastructure.

    MicrosoftEnhanced collaboration on AI technologies.

    Deeper integration of ServiceNow AI Control Tower and Microsoft Agent 365.

    NVIDIACollaboration on AI agent security.

    New agents secured by the NVIDIA OpenShell Runtime and governed by ServiceNow AI Control Tower.

    AccentureEnhanced collaboration on AI-native FTEs.

    Enhanced collaboration between ServiceNow's AI native FTEs and industry-led Accenture FTEs.

    Department of Air ForceExpansion of ServiceNow AI platform use.

    Deployment will unify IT operations and enterprise visibility.

    ExperianUse of ServiceNow for intelligence automation and platform integration.5-year deal

    Experian is using ServiceNow to automate intelligence at scale, and platforms will be integrated, embedding Experian's data and decisioning into existing ServiceNow workflows.

    MaybankLeveraging ServiceNow for resilient operations and security.5-year deal

    Malaysia's largest bank will use ServiceNow to establish a resilient operations center to fortify security and resilience, and for autonomous regional operations.

    U.S. federal government agenciesConsolidating asset discovery and security response.

    Largest IT contractors and agencies are consolidating asset discovery and security response on ServiceNow. One agency is using Armis to move from asset blind incident response to comprehensive threat hunting.

    HitachiStandardizing enterprise asset management and partnering on infrastructure monitoring.

    Hitachi will standardize enterprise asset management across its global businesses on ServiceNow and partner to advance the Hitachi Intelligent infrastructure monitoring solution.

    City of RaleighDeployment of ServiceNow's L1 AI specialist.

    First local government to deploy ServiceNow's L1 AI specialist in production with no in-house AI engineering bench, moving towards autonomous operations one ticket category at a time.

    Large global consumer goods companyPartnership for first Agentic AI use case in ITSM.

    Partnered with ServiceNow to launch its first Agentic AI use case in ITSM to triage workflows, rapidly deploying a repeatable governance-first blueprint for future agentic use cases.

    Leading global food and beverage companyDeployment of AI Control Tower for governance.

    Deployed AI Control Tower to govern proliferating AI agents across 5 platforms, ensuring governance, risk, value validation, and observability for AI agents.

    Large airlineRunning customer service voice calls on ServiceNow's voice AI CRM agents.

    Live, in production, handling 5 million annual voice calls in year 1 alone, resulting in high customer satisfaction.

    North American automotive marketplaceModernizing CPQ environment.

    Selected ServiceNow to help sales teams achieve speed and accuracy at scale, replacing a legacy CPQ provider that couldn't handle volume or complexity.

    American software leaderModernizing a highly customized quoting environment.

    Selected ServiceNow to modernize quoting, with the ability to connect CPQ with broader workflows, customer data, and service operations as a key differentiator.

    North American telecom infrastructure providerUnifying commercial and field operations.

    Selected ServiceNow to unify commercial and field operations on a single platform.

    Regional financial institutionConsolidating loan origination workflow.

    Consolidated its loan origination workflow onto ServiceNow's unified CRM platform, replacing legacy point solutions.

    Fortune 50 health care and retail distributorConsolidating vendor risk governance and fraud detection.

    Using ServiceNow's AI Control Tower to consolidate vendor risk governance and fraud detection across 1,000 suppliers.

    Tech MahindraTransforming workflow processes and asset governance.5-year deal

    Strengthening through a 5-year deal to fundamentally transform workflow processes across HR, IT, security, and govern assets at mass scale with Agentic AI.

    NTT DataDriving AI scale for internal use globally.

    Has a governance process with ServiceNow to drive AI scale for all internal use globally on a single platform, focusing on responsible innovation and real-time monitoring.

    Risks & headwinds

    2
    Short-term gross margin pressureShort-term

    Not quantified, but acknowledged as 'a little bit of short-term pressure'

    Mitigation: Expected to lessen mid-term as hyperscaler costs come down and AI consumption optimizes; operating margins will continue to accrete.

    Revenue timing shift due to U.S. federal demandQ3 FY26

    Half of Q2 beat was a pull forward of on-prem revenue from Q3

    Mitigation: Purely timing related; pipe looks good for Q3, and full-year guidance was raised for net new ACV overachievement.

    What to watch in Q3 FY26

    5

    AI ACV progress

    by end of 2026
    CurrentOver $1 billion
    TargetOn track for $1.5 billion by end of 2026

    Why it matters

    AI monetization is a key investment thesis driver, and exceeding targets indicates strong adoption and revenue potential.

    ServiceNow AI ACV exceeded expectations again, surpassing $1 billion, keeping us on track to beat our target of $1.5 billion ACV by the end of 2026.

    Q&A highlights

    6

    What are the reflections on the L1 ITSM product cycle, what's working, and how much do customers increase spending with ServiceNow when adopting L1 automation?

    The L1 ITSM product cycle is highly accelerated, solving for human-equivalent AI specialists that handle full tasks end-to-end, resonating with customers. 40+ customers are using it, closing 80-85% of service requests without human interaction, reducing resolution time from days to minutes. This drives significant productivity gains and labor arbitrage. AI ACV crossed $1 billion, tracking ahead of the $1.5 billion target, with L1 autonomous agents contributing to consumption and the goal of AI reaching 30% of ACV by 2030.

    “We're talking about closing down close to 80% to 85% of the service requests without having any human interaction. And it's end-to-end service request completion, not just giving you the information, but actioning on those requests as well.”

    asked by Gabriela Borges · answered by Amit Zavery

    2 min read5 chapters

    Detailed Narrative

    01

    AI Control Tower & Cybersecurity Strategy

    ServiceNow is positioning its platform as the 'AI Control Tower' for enterprises, providing a governed layer for deploying AI securely. The company's cybersecurity business, already over $1 billion, is the fastest-growing among the top 10 cyber companies. This strategy integrates solutions like Armis and Veza to manage identities (human, machine, AI) and devices, offering a complete 360-degree capability to secure the enterprise amidst an exploding attack surface. The platform aims to provide a single command center for visibility, governance, and actionability across all AI and security aspects.

    02

    AI Monetization & Adoption

    AI adoption is accelerating, with ServiceNow AI ACV surpassing $1 billion and net new ACV growing over 40% quarter-over-quarter. The number of customers with Agentic AI in production has increased 9x over the last 9 months. New AI native SKUs are making agentic solutions more accessible, driving deal volume among first-time AI buyers up over 45% year-over-year and price uplifts of 20-30%. The company is tracking ahead of its target for AI to reach 30% of ACV by 2030, emphasizing that its AI delivers measurable ROI by completing work, not just advising.

    03

    CRM and EmployeeWorks Momentum

    ServiceNow's CRM business is now a $2 billion ACV business, with ACV growth accelerating year-over-year and quarter-over-quarter, and sales CRM average deal size doubling year-over-year. The company expects to execute over 2 billion service CRM cases this year, with partners increasingly positioning ServiceNow as an operational CRM platform. EmployeeWorks, combining Moveworks conversational AI with ServiceNow workflows, is gaining strong momentum, with deal volume growing over 150% quarter-over-quarter, acting as a strategic entry point for enterprise-wide employee experiences.

    04

    Strategic Partnerships & Innovation

    ServiceNow is expanding strategic partnerships, including deeper integration with Microsoft Agent 365, extended Agentic AI governance with Project Arc, and new agents secured by NVIDIA OpenShell Runtime. The company is also launching new AI-native products, such as a conversational service desk experience with AI-coded automation, targeting the Fortune 500,000. These innovations aim to expand the total addressable market and provide customers with deterministic, outcome-based AI solutions.

    05

    Operational Efficiency and Headcount Discipline

    Despite acquiring three companies (Moveworks, Veza, Armis), ServiceNow plans to complete FY26 and start FY27 with the same headcount as before the acquisitions. This discipline, combined with revenue outperformance, contributed to a 300 basis point beat on operating margin in Q2. The company remains committed to scaling operating and free cash flow margins, aiming for a Rule of 60 by 2030, balancing growth with profitability.

    AI-generated summary of the company’s earnings call. Not investment advice.