ServiceNow delivered results that surpassed analyst expectations across key metrics in Q2 2026, yet the enterprise software provider’s shares experienced a significant decline during regular trading hours before staging a partial comeback when after-hours trading commenced.
SERVICENOW $NOW Q2’26 EARNINGS HIGHLIGHTS
Subscription: $3.88B; +24.5% YoY, +23% cc
; +24% YoY, +22.5% cc
Q3 Guide:
— Wall St Engine (@wallstengine) July 22, 2026
The enterprise software firm posted adjusted earnings per share of $0.90, topping the Street consensus of $0.86. Total revenue reached $3.99 billion, exceeding analyst forecasts of $3.93 billion. Subscription-based revenue totaled $3.877 billion, representing a 23% increase year-over-year when measured in constant currency.
Shares finished the regular session at $95.46, marking a 6.47% drop from the previous closing price of $102.06. Following the earnings release, the stock rallied 4.75% in extended trading to reach $99.99 — though this recovery still left shares approximately 2% below where they closed the day before.
The company’s non-GAAP operating margin registered at 29.5%, exceeding internal guidance by 300 basis points. Free cash flow margin for the three-month period stood at 16%.
Total remaining performance obligations reached $29 billion, reflecting a 22% gain in constant currency. Current RPO measured $13.2 billion, up 21.5%.
The company’s AI-related annual contract value surpassed the $1 billion threshold during the quarter, positioning ServiceNow ahead of schedule toward its $1.5 billion year-end 2026 target. Leadership also indicated the organization remains on course for AI to comprise 30% of total ACV by 2030.
Among new AI offerings are Level 1 ITSM AI specialists, which currently resolve between 80% and 85% of service requests autonomously without requiring human intervention. The company’s AI-native products command a premium of 20% to 30% over traditional offerings.
ServiceNow also showcased its AI Control Tower solution, designed to manage governance across AI agents, while emphasizing expanded partnerships with Microsoft, NVIDIA and Accenture.
CEO Bill McDermott stated the company sits “in the bullseye of AI, cybersecurity, workflow orchestration, integration, and automation.” CFO Gina Mastantuono emphasized that customers are purchasing “resolutions,” not tokens.
ServiceNow increased its fiscal 2026 subscription revenue projection to $15.755B–$15.770B, representing 21% growth in constant currency. The full-year operating margin target remains unchanged at 31.5%, while free cash flow margin is expected to reach 35%.
For the third quarter, management anticipates subscription revenue between $3.975B and $3.980B, indicating 20% constant-currency growth, with an operating margin of 31%.
Leadership acknowledged that a portion of Q2’s performance stemmed from U.S. federal government contracts that accelerated revenue recognition from Q3 into Q2. However, executives emphasized this timing shift wasn’t the complete picture, highlighting net new ACV that substantially exceeded internal plans.
Pressure on gross margins from hyperscaler partnerships and AI consumption patterns remains an area to monitor. With the stock trading at a P/E multiple of 57 and a PEG ratio of 4.34, valuation provides minimal cushion for execution missteps.
Jefferies analyst Samad Samana increased his price target on NOW to $140 from $135 after reviewing the quarterly results, maintaining a Buy rating. He highlighted solid beats on constant currency cRPO, subscription revenue, and operating margin, while noting that the Q3 cRPO guidance demonstrates fundamental business strength.
NOW shares have traded between $81.24 and $210.20 over the past 52 weeks.
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