- ServiceNow’s subscription revenue grew 23% to $2.54 billion in the second quarter, due to robust demand for its expanded product suite.
- Amid leadership changes, ServiceNow raised its annual subscription revenue outlook, in a sign of confidence in continued business momentum.
OUR TAKE
Software company ServiceNow has reported impressive second-quarter results, with subscription sales up a substantial 23% to $2.54 billion, beating analyst forecasts. The increase reflects robust demand for the company’s expanded suite of AI-powered software tools. By expanding into new areas with generative AI products, ServiceNow is not only strengthening its market position, but also setting a benchmark for integrating advanced technologies into business workflows. The company’s strategic progress and strong financial performance point to a promising future, despite some internal challenges and competition from industry peers such as Salesforce and Workday.
—Heidi Luo, BTW reporter
What happened
ServiceNow, a leading software company in California, reported increased sales and bookings in the second quarter, with subscription sales surging to $2.54 billion, up 23% year-over-year. This performance exceeded analyst expectations of $2.51 billion, signalling strong customer demand for the company’s software solutions, the company said in a statement on Wednesday. Current remaining performance obligation, a measure of booked revenue, increased 22% in the period ended 30 June.
Based in Santa Clara, ServiceNow has expanded its traditional IT and employee workflow solutions to include customer service enhancements and AI-driven tools. This strategic expansion has been a key driver of the company’s financial success and suggests a strong market response to its AI-integrated offerings.
“Adoption of the company’s generative AI-focused products is helping to drive results. I doubt you could have achieved these extraordinary results without generative AI,” said Chief Executive Officer Bill McDermott.
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Why it’s important
ServiceNow saw its shares rise 7% in extended trading after closing at $730.87, despite a modest 3.4% increase for the year. ServiceNow gave an outlook for the current quarter that was slightly below estimates. It said subscription sales for the period ending in September would be around $2.66 billion, short of the $2.68 billion that analysts had forecast. For the fiscal year ending in December, the company raised its outlook for subscription revenue growth by about half a percentage point.
The company has faced some internal challenges, including the immediate departure of President and COO CJ Desai following a complaint about a government contract sales process. CEO Bill McDermott has assured that the incident will not affect the company’s overall performance or its government contracts.
ServiceNow is also stepping up its competition with Salesforce and Workday by expanding its AI-driven product offerings. This expansion strategy is evident as ServiceNow continues to innovate, particularly with AI technologies that enhance cross-application functionality, moving into spaces traditionally occupied by its competitors.
“The second quarter results were surprisingly strong and the outlook suggests that the company’s momentum remains healthy,” said Samad Samana, an analyst at Jefferies.
