ServiceNow lifts guidance on AI growth

ServiceNow has announced robust second-quarter results, prompting the company to raise its revenue guidance. Following the announcement, shares surged by 7%. The enterprise technology firm reported subscription revenues reaching $3.11 billion, exceeding the $3.03 billion forecast from StreetAccount. This strong performance has led ServiceNow to revise its full-year subscription revenue guidance, projecting figures between $12.775 billion and $12.795 billion, driven by the increasing adoption of artificial intelligence across various sectors. Bill McDermott, the chairman and CEO of ServiceNow, stated, "Every business process in every industry is being refactored for agentic AI," highlighting the transformative impact of AI on business operations. The company also reported a significant increase in net income, which rose by 47% to $385 million, or $1.84 per share, compared to $262 million, or $1.26 per share, a year earlier. Total revenues grew nearly 23%, reaching approximately $3.22 billion. Looking ahead, ServiceNow anticipates a potential 2 percentage point decline in current remaining obligations for the third quarter, attributed to seasonal factors and a trend of more customers renewing contracts in the final quarter. Additionally, the company acknowledged that shifts in budget allocations at U.S. government agencies could influence its results. Gina Mastantuono, the finance chief, commented on the current landscape: "While federal business is a bit uncertain today versus a year ago, we're navigating it well, and we feel confident that our guidance reflects any potential changes that we're seeing." Notably, one U.S. federal government client contributed 11% of the company's revenues in the most recent annual earnings report. McDermott also noted that the public sector business experienced a 30% growth during the first quarter. Looking forward, ServiceNow projects subscription revenues between $3.26 billion and $3.27 billion, surpassing StreetAccount's estimate of $3.21 billion. Meanwhile, current remaining performance obligations increased nearly 25%, totaling $10.92 billion for the quarter.