Business Insider ServiceNow reports Q2 results, raises guidance, and says its AI business topped $1 billion in annual contract value.
- ServiceNow's subscription revenue jumped 25% to $3.9 billion, surpassing TD Cowen's forecast.
- ServiceNow raised its full-year revenue guidance, matching TD Cowen's upper expectation.
- ServiceNow's AI business hit $1 billion in value as customer use of AI agents surged ninefold.
ServiceNow reported results that met or exceeded Wall Street expectations as the corporate software company grapples with concerns about AI's impact on its future prospects.
Subscription revenue rose 25% to $3.9 billion, slightly ahead of TD Cowen's forecast of about $3.8 billion.
Current remaining performance obligations, a key measure of contracted future revenue, reached $13.2 billion. TD Cowen was looking for $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 end of this forecast matched TD Cowen's expectations.
The stock popped more than 5% in after-hours trading, following the results. However, the company's shares have slumped 50% in the past year amid concerns that generative AI could replace some corporate software services.
The latest example of this arrived on Wednesday morning when OpenAI unveiled Presence. This new offering helps companies set up and run AI agents to help automate tasks such as customer support, sales, and resolving employee IT service requests.
In response to AI offerings like these, ServiceNow is building AI into existing products and rolling out new AI-powered offerings. The software company said its AI business surpassed $1 billion in annual contract value during the second quarter.
ServiceNow customers with AI agent deployments in production have increased ninefold over the past nine months, while the company said it signed 123 deals worth more than $1 million in net new annual contract value, up nearly 40% from a year earlier.
Chief Executive Bill McDermott said businesses increasingly need software that governs AI systems rather than simply running AI models.
He positioned ServiceNow's AI Control Tower as a product that does exactly that by managing AI agents regardless of which model or chip corporate customers choose.
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Key Terms Explained #
AI Agent An autonomous AI system that can perceive its environment, make decisions, and take actions to achieve goals.
Generative AI AI systems that create new content — text, images, audio, video, or code — rather than just analyzing or classifying existing data.
OpenAI The AI company behind ChatGPT, GPT-4, DALL-E, and Whisper.