{"id":116502,"date":"2026-07-23T14:00:25","date_gmt":"2026-07-23T14:00:25","guid":{"rendered":"https:\/\/www.europesays.com\/ai\/116502\/"},"modified":"2026-07-23T14:00:25","modified_gmt":"2026-07-23T14:00:25","slug":"servicenow-finally-might-escape-the-saaspocalypse-with-strong-q2-earnings-beat","status":"publish","type":"post","link":"https:\/\/www.europesays.com\/ai\/116502\/","title":{"rendered":"ServiceNow finally might escape the ‘SaaSpocalypse’ with strong Q2 earnings beat"},"content":{"rendered":"

For most of 2026, ServiceNow<\/a> has been Exhibit A for the \u201cSaaSpocalypse\u201d<\/a>\u2014the fear that autonomous AI agents will let companies build their own workflows and gut demand for traditional enterprise software.<\/p>\n

The stock entered Wednesday down roughly a third for the year and about 50% off its 52-week high, even as revenue kept climbing north of 20%. ServiceNow CEO Bill McDermott kept saying his company was \u201cthe enterprise gateway for agentic AI,\u201d and he kept showing impressive growth figures to prove it. But the market just wasn\u2019t buying<\/a>.<\/p>\n

During Wednesday\u2019s regular trading session, before ServiceNow announced its second quarter earnings, shares fell another 6.5% following a report that OpenAI planned to build an enterprise product, called Presence, designed to weave AI agents into the internal machinery of large organizations\u2014precisely the territory ServiceNow has staked out with its AI Control Tower product.<\/p>\n

But then ServiceNow released its numbers. And, perhaps finally, traders decided McDermott was not just blowing smoke. Shares jumped as much as 7% in after-hours trading, wiping out the regular-session decline before paring the gains slightly.<\/p>\n

\u201cWe are who we said we were,\u201d McDermott told Fortune in an interview Wednesday, conducted hours before the results were made public. \u201cWe\u2019ve become the agentic front door to the enterprise, and we\u2019re managing everything for our customers from workflow to cybersecurity.\u201d<\/p>\n

ServiceNow reported second-quarter subscription revenue of $3.88 billion, up 24.5% year over year, and total revenue just shy of $4 billion, up 24%. Both beat the high end of the company\u2019s own guidance.<\/p>\n

Adjusted earnings came in at 90 cents per share, ahead of the roughly 86 cents Wall Street analysts expected. The company raised its full-year subscription-revenue guidance to a range of $15.76 billion to $15.78 billion.<\/p>\n

Current remaining performance obligations\u2014a metric closely watched by investors that measures revenue that customers have already contracted for and which ServiceNow will deliver in the next 12 months\u2014rose 21%, to $13.2 billion. Total remaining performance obligations reached $29 billion, also up 21%. \u00a0<\/p>\n

ServiceNow\u2019s AI products crossed $1 billion in annual contract value for the first time, a threshold McDermott has been promising for a year; the company says agentic deployments have grown ninefold in nine months. It closed 123 deals worth more than $1 million in net new annual contract value, up nearly 40% from a year earlier. The company\u2019s non-GAAP operating margin held at 29.5%. Management reiterated its long-term targets: $30 billion-plus in subscription revenue <\/a>and a \u201cRule of 60\u201d by 2030. (\u201cRule of 60\u201d means that ServiceNow\u2019s revenue growth rate added to its profits margin would equal or exceed 60. Investors traditionally expected enterprise software companies to operate with a \u201cRule of 40.\u201d McDermott said ServiceNow is currently running at a \u201cRule of 56.\u201d)<\/p>\n

Increasingly, McDermott sees cybersecurity as ServiceNow\u2019s key enterprise sales driver. He claims ServiceNow, bolstered by its acquisitions of Armis and Veza, has become \u201cthe fastest growing cybersecurity company in enterprise software\u201d and the eighth-largest cybersecurity company overall.<\/p>\n

\u201cThe attack surface is exploding because of AI,\u201d he said, arguing that every ungoverned agent and machine identity widens the \u201cblast radius\u201d companies must police. His pitch is that once customers buy the control tower to govern their AI agents, the rest of ServiceNow\u2019s platform follows: \u201cEverybody is going to need our control tower, and so I expect that to sell like hotcakes.\u201d<\/p>\n

Notably, McDermott declined to join fellow enterprise-software CEOs, such as Microsoft\u2019s Satya Nadella and Palantir\u2019s Alex Karp, who have been warning customers away from reliance on AI models from frontier AI labs over claims that the companies mine customer data to build competing products. \u201cI\u2019m not agreeing with that narrative. I actually fully support the frontier models,\u201d McDermott said, framing ServiceNow instead as their distribution channel into the enterprise.<\/p>\n

\u201cAI thinks, but workflow acts,\u201d he said. Companies won\u2019t \u201cbet a business process on \u2018probably it\u2019s right,\u2019\u201d he argued, and most enterprise AI runs on cheaper, domain-specific models anyway: \u201cWe don\u2019t need Lamborghinis to deliver the mail.\u201d<\/p>\n

The open question is whether Wednesday\u2019s beat and share price jump is just a blip, or the catalyst that convinces investors to give the stock a more durable re-rating. McDermott has been putting strong numbers on the board for more than a year without much reward. \u201cInnovating for the enterprise, it\u2019s a lot like politics\u2014it\u2019s easy to make noise, very hard to make progress,\u201d he said, casting the quarter as another entry in \u201cseven years of defying all the naysayers.\u201d<\/p>\n

Some skeptics aren\u2019t fully convinced. Bears continue to flag the company\u2019s rich valuation\u2014the company trades at a trailing price-to-earnings ratio of close to 60\u2014and concerns about the pricing of ServiceNow\u2019s products. Some analysts warned that the company\u2019s July 1 pricing change pulled renewals forward, potentially borrowing backlog strength from later quarters. ServiceNow itself acknowledged that part of the revenue beat came from on-premise deals\u2014driven by strong U.S. federal demand\u2014that landed in the second quarter rather than the third.<\/p>\n

But the after-hours move suggests investors are willing to entertain the idea that ServiceNow as a winner of the agentic AI era, rather than a victim.<\/p>\n","protected":false},"excerpt":{"rendered":"For most of 2026, ServiceNow has been Exhibit A for the \u201cSaaSpocalypse\u201d\u2014the fear that autonomous AI agents will…\n","protected":false},"author":2,"featured_media":116503,"comment_status":"","ping_status":"","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[6],"tags":[405,7537,10892,3775,286,157,404,327,10893],"class_list":["post-116502","post","type-post","status-publish","format-standard","has-post-thumbnail","category-agentic-ai","tag-ai-agents","tag-artificial-intelligence-agents","tag-business-software","tag-earnings","tag-markets","tag-openai","tag-saas","tag-servicenow","tag-software-as-a-service"],"_links":{"self":[{"href":"https:\/\/www.europesays.com\/ai\/wp-json\/wp\/v2\/posts\/116502","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.europesays.com\/ai\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.europesays.com\/ai\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.europesays.com\/ai\/wp-json\/wp\/v2\/users\/2"}],"replies":[{"embeddable":true,"href":"https:\/\/www.europesays.com\/ai\/wp-json\/wp\/v2\/comments?post=116502"}],"version-history":[{"count":0,"href":"https:\/\/www.europesays.com\/ai\/wp-json\/wp\/v2\/posts\/116502\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/www.europesays.com\/ai\/wp-json\/wp\/v2\/media\/116503"}],"wp:attachment":[{"href":"https:\/\/www.europesays.com\/ai\/wp-json\/wp\/v2\/media?parent=116502"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.europesays.com\/ai\/wp-json\/wp\/v2\/categories?post=116502"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.europesays.com\/ai\/wp-json\/wp\/v2\/tags?post=116502"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}