ServiceNow climbs after earnings put cyber push in focus
ServiceNow shares rose after hours as subscription revenue beat expectations and CEO Bill McDermott pointed to cybersecurity and AI demand.
By Sal Moretti · Money Reporter
3 min read
ServiceNow shares rose 5% in after-hours trading Wednesday after the software company topped Wall Street’s second-quarter subscription-revenue expectations and pointed to stronger demand around cybersecurity and AI workflows.
The company said subscription revenue reached $3.877 billion in the quarter, up 24.5% from a year earlier. That cleared the $3.817 billion consensus estimate from analysts tracked by FactSet.
ServiceNow also said deployments of its agentic AI offering increased ninefold over nine months. Chief Executive Bill McDermott told MarketWatch that ServiceNow is leading what he called the “agentic enterprise” across workflow and cybersecurity.
Cybersecurity has become a key part of the company’s growth story, according to MarketWatch. The report said ServiceNow recently acquired Armis and Veza and now manages more than 7 billion devices in real time.
Guidance gets a mixed read
ServiceNow’s third-quarter subscription-revenue forecast came in slightly below Wall Street’s target. The company projected $3.975 billion to $3.98 billion, while FactSet’s analyst consensus stood at $4.01 billion.
McDermott told MarketWatch that the company outperformed in the second quarter with some federal deals, while also raising its full-year outlook.
ServiceNow now expects full-year subscription revenue of $15.76 billion to $15.78 billion. Its prior forecast called for $15.735 billion to $15.775 billion.
The company also projected a 31% operating margin for the third quarter, up from 29.5% in the second quarter.
McDermott said ServiceNow has held headcount flat and saved $1 billion in costs by using its own autonomous workflow tools inside the company. He told MarketWatch those savings can be reinvested into innovation.
Backlog beats estimates
ServiceNow reported $29 billion in remaining performance obligations, a measure of contracted business not yet recorded as revenue. That was above the $28.8 billion consensus estimate from FactSet.
In a press release, McDermott said the figure was driven by longer customer commitments and strong demand from the company’s partner ecosystem.
The stock’s after-hours gain came after a rough stretch. MarketWatch reported that software stocks have been hit this year by worries that AI could disrupt existing business models. ServiceNow shares were down 37% for the year through Wednesday’s close.
ServiceNow management has argued that the company is not exposed to AI displacement in the same way as some software peers because its platform is used by enterprises to manage business procedures, according to MarketWatch.
The company’s AI Control Tower lets customers map and govern AI agents across cloud and IT systems. MarketWatch reported that the tool is also becoming a gateway for checking non-human identities.
ServiceNow expects more than 2.2 billion agents to take part in the global economy in the coming years, with those agents needing to be tracked and regulated.
McDermott told MarketWatch that the “attack surface is exploding” as ungoverned assets and identities increase AI-related risk. He said ServiceNow is building an integrated end-to-end security platform.
This story draws on original reporting from MarketWatch.