Shares in ServiceNow Inc. rose more than 3% in late trading today after the enterprise software company beat Wall Street targets across every headline metric in its fiscal second quarter and raised its full-year subscription revenue outlook, as its artificial intelligence products crossed $1 billion in annual contract value for the first time.

For the quarter that ended on June 30, ServiceNow reported adjusted earnings of 90 cents per diluted share, up from a split-adjusted 82 cents in the same quarter a year earlier, on revenue of $3.99 billion, up 24% year-over-year. Both topped the 86 cents per share and revenue of $3.93 billion expected by analysts.

Subscription revenue, the bulk of the total, rose 24.5% to $3.88 billion, or 23% in constant currency. Adjusted operating margin came in at 29.5%. Current remaining performance obligations, booked revenue the company expects to recognize over the next 12 months, climbed 21%, to $13.2 billion and total remaining performance obligations reached $29 billion, also up 21%.

The AI business was the figure investors had been waiting on. ServiceNow said its AI portfolio passed $1 billion in annual contract value during the quarter and Chairman and Chief Executive Bill McDermott said agentic deployments of the software climbed ninefold over the past nine months.

The company closed 123 deals worth more than $1 million in net new annual contract value in the quarter, up nearly 40% from a year earlier and ended June with 658 customers, each paying more than $5 million a year.

“ServiceNow’s exceptional Q2 results solidify our position as the fastest-growing major enterprise software and cybersecurity company,” McDermott said in the earnings release. “With our AI Control Tower as the market standard, agentic deployments of ServiceNow AI increased ninefold in just nine months. We are who we said we were: a defining company that is only just getting started.”

ServiceNow raised its full-year subscription revenue guidance to between $15.76 billion and $15.78 billion, growth of about 22.5%, citing continued strength in net new annual contract value. The company said strong U.S. federal demand pulled some on-premises subscription revenue forward from the third quarter into the second. For the third quarter, it guided to subscription revenue of about $3.98 billion, up 20.5%.

President and Chief Financial Officer Gina Mastantuono said net new AI bookings again outpaced expectations and that the AI Control Tower was fueling growth in the company’s security and risk business.

The report was among the more closely watched on the software calendar. ServiceNow shares had fallen about 35% this year heading into the results, and options traders had positioned for a swing of more than 12% in either direction.

Photo: ServiceNow