ServiceNow reported results that met or exceeded Wall Street expectations as the enterprise software company grapples with concerns about the impact of AI on its future outlook.
Subscription revenue rose 25% to $3.9 billion, slightly above TD Cohen’s estimate of about $3.8 billion.
Current remaining performance obligations, a key indicator of future contract revenues, amounted to $13.2 billion. TD Cowen was seeking $13 billion in cRPO.
ServiceNow also raised its full-year subscription revenue guidance to a range of $15.76 billion to $15.78 billion. The upper limit of this prediction matched TD Cowen’s prediction.
Following the results, the stock price soared more than 5% in after-hours trading. But the company’s stock has fallen 50% over the past year on concerns that generative AI could replace some enterprise software services.
The latest example of this arrived on Wednesday morning when OpenAI announced Presence. This new service helps businesses set up and run AI agents to automate tasks such as customer support, sales, and resolving employee IT service requests.
In response to these AI products, ServiceNow is embedding AI into existing products and rolling out new AI-powered products. The company announced that annual contract value for its AI business exceeded $1 billion in the second quarter.
The number of ServiceNow customers deploying AI agents in production has increased nine times over the past nine months, and the company said it had 123 annual net new business deals, representing more than $1 million in annual net new business value, an increase of nearly 40% year-over-year.
CEO Bill McDermott said companies increasingly need software to manage AI systems, not just run AI models.
He positioned ServiceNow’s AI Control Tower as a product that does just that by managing AI agents, regardless of the model or chip that enterprise customers choose.
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