ServiceNow's (NOW) shares spiked early Thursday as it reported first-quarter results above market expectations amid robust demand for its artificial intelligence offerings, while the software company raised its full-year subscription revenue outlook at the midpoint.

ServiceNow expects subscription revenue to be in a range of $12.64 billion to $12.68 billion for 2025, representing a $5 million increase at the midpoint compared with its previous guidance, Chief Financial Officer Gina Mastantuono said during a late Wednesday earnings call, according to a FactSet transcript. The current consensus on FactSet is for $12.65 billion. The stock jumped 9.2% in the most recent premarket activity.

"While demand remains strong, we've taken a prudent approach to the remainder of 2025 and are only flowing through part of those benefits into our full-year outlook," Mastantuono said on the call. "This allows us to factor in potential risks as they pertain to the current geopolitical environment."

Earlier this month, President Donald Trump declared a 90-day pause on reciprocal levies for non-retaliating countries. However, the US and China have been in a deadlock, having raised tariffs on each other's goods multiple times.

"We believe that management applied increased conservatism in their outlook for a number of potentially impacted verticals," Truist Securities said in a Wednesday client note. "Despite commentary that they are seeing continued strength in the demand environment, we believe that management was prudent in limiting the pass through of the beat in the quarter to their annual guide."

ServiceNow Chief Executive Bill McDermott told analysts on the call that business heads across all industries are looking to increase their competitiveness and manage costs in the face of tariffs. "Businesses reduce dependency on high tariff regions by reprioritizing Tier 2 and 3 suppliers, while activating the certification of new vendors," according to McDermott.

The firm is deepening its focus on US federal agencies as it anticipates "significant growth opportunities" from their operational requirements, Mastantuono said on the call. The company aims to continue its "productive discussions" with senior administration and Department of Government Efficiency, or DOGE, officials, McDermott said. DOGE was created by Trump to maximize governmental efficiency and productivity.

ServiceNow posted adjusted earnings of $4.04 per share for the March quarter, up from $3.41 the year before, topping the Street's view for $3.83. Overall revenue climbed 19% to $3.09 billion, ahead of the average analyst estimate of $3.08 billion. Subscription sales contributed $3.01 billion, representing a yearly jump of 19%.

"Strong demand for ServiceNow's AI platform for business transformation is gaining momentum," McDermott said on the call. Internal use of AI also drove "meaningful" operational expenditure efficiencies, generated "strong" profitability and free cash flow, according to Mastantuono.

The company ended the quarter with 508 customers with more than $5 million in annual contract value, while the number of customers contributing $20 million or more in ACV increased by almost 40% year-over-year, buoyed by continued momentum in large enterprise deals, Mastantuono said. Current remaining performance obligations stood at $10.31 billion, reflecting year-over-year growth of 22%.

For the ongoing three-month period, the firm expects subscription revenue to come in between $3.03 billion and $3.04 billion, an increase of 19% to 19.5% from the prior-year quarter. The Street is currently looking for subscription sales of $3.03 billion.