ServiceNow (NOW) delivered a strong second-quarter 2026 performance that sent its stock surging more than 7% in after-hours trading, though the company reported revenue of $3.99 billion, up 24% year-over-year and above the $3.92 billion consensus estimate. Subscription revenue hit $3.88 billion, up 24.5% year-over-year, and adjusted earnings per share reached $0.90, surpassing the $0.86 forecast.

Financial Highlights and AI Growth

Current remaining performance obligations (cRPO), a key metric for ServiceNow — reached $13.2 billion, up 21% year-over-year, but this represents the portion of the company’s backlog expected to convert into revenue over the next 12 months. The company also announced that its AI offerings have surpassed $1 billion in annual contract value; ServiceNow now has 658 customers generating more than $5 million in annual contract value, a 23% increase year-over-year.

Despite the strong top-line results, ServiceNow’s net margin for the last twelve months fell to 11.3%, down from 13.8% in the previous year, this decline came even as revenue for the period reached $14.7 billion and net income stood at $1.7 billion. Some analysts expect the company’s net margin to rise to 17.1% over the next three years, driven by AI platform expansion, CRM extensions, and public sector business growth.

Strategic Moves and Financial Projections

ServiceNow raised its fiscal 2026 subscription revenue guidance to $15.76 billion to $15.78 billion, up from its prior outlook of $15.73 billion to $15.77 billion, while For the third quarter, the company expects subscription revenue of $3.97 billion to $3.98 billion, with adjusted constant currency growth of 20%.

On the same day, ServiceNow shares had closed the regular session down nearly 6.5%, but the strong earnings report and guidance revisions reversed the trend, At the time of writing, the stock was up more than 5% in after-hours trading.

Comparative Performance and Market Reaction

ServiceNow’s Q2 results show a continuation of its growth trajectory, with revenue rising from $3.2 billion in Q2 2025 to $4.0 billion in Q2 2026. However, its earnings per share have been inconsistent, ranging from $0.37 in Q2 2025 to $0.48 in Q4 2025, before settling at $0.29 for Q2 2026. Analysts are now watching closely to see if the company can maintain its profitability while scaling its AI and automation initiatives.

Investors are also tracking how ServiceNow’s performance stacks up against broader market narratives. While the company has positioned itself as a leader in AI-driven workflows and digital transformation, its recent margin contraction raises questions about the efficiency of these initiatives. Some analysts remain optimistic, citing the potential for higher margins in the coming years as AI adoption accelerates across enterprise operations.