ServiceNow shares gained ground as an earnings beat and a booming AI pipeline offered welcome relief to software investors

ServiceNow's AI annual contract value has surpassed $1 billion.

Major stock indexes were falling Thursday as investors digested Alphabet and Tesla earnings, but ServiceNow shares were bucking the trend.

ServiceNow's (NOW) stock rose 2% in recent morning trading on the back of an earnings beat and renewed confidence in the company's artificial-intelligence strategy. It's a major victory for the software giant, which has seen its shares weighed down this year by fears of AI disruption.

The rally came despite a drop of more than 1% in the S&P 500 index SPX, and a 2.4% selloff in the tech-heavy Nasdaq composite COMP.

The company posted subscription revenue of $3.88 billion for the second quarter, up 25% year over year. But the main focus of the print was ServiceNow's current remaining performance obligations, or the amount of revenue expected to be recognized in the next 12 months, which rose 21% to $13.2 billion.

The cRPO traction was exactly what investors needed to see as evidence of ServiceNow being a beneficiary of the AI boom, signaling that the company has built up a robust pipeline of demand. AI traction is increasing as the company's AI annual contract value surpassed $1 billion, putting the company ahead of schedule to beat its year-end target of $1.5 billion.

"To see ServiceNow have the quarter they did was much of a relief," Jay Woods, chief market strategist at Freedom Capital Markets, wrote in a Thursday note. "I think we can see a relief rally of another 10% on top of the gains this morning in ServiceNow."

ServiceNow's AI Control Tower provides a platform for businesses to monitor and govern AI agents across different environments. "Whichever chip wins, whichever lab wins, whichever price-per-token regime prevails, the enterprise needs one govern layer of record for work, and ServiceNow offers needed certainty in an uncertain stack," CEO Bill McDermott said on the earnings call.

The quality of ServiceNow's AI portfolio is improving, Bank of America analyst Tal Liani wrote in a Thursday note. The company is shifting its offerings from simple, repetitive use cases "to broader agentic workflows that can address less-documented edge cases by using ServiceNow's workflow history, [configuration management database] context, and new Knowledge Specialists," Liani said.

ServiceNow serves as an enterprise's system of record, or official data source. That gives ServiceNow a "key strategic advantage versus third-party AI tools" that need to extract, contextualize and reintegrate data across platforms, according to Liani.

Investors were also pleased to see ServiceNow's momentum in cybersecurity. The company acquired cybersecurity firms Armis and Veza in the past year to power its security and risk platform. The acquisitions were controversial at the time, with many criticizing the high price.

Today, cybersecurity has emerged as a growth driver for the business, Jefferies analyst Samad Samana wrote in a Thursday note. Customers are leveraging the AI Control Tower to manage their cybersecurity activity, and security and risk were included in 16 of the company's top 20 deals this quarter.

ServiceNow heads into the second half of the year "with healthy momentum and a reasonable valuation, which should support a rally for the stock," Samana said.

Now read: ServiceNow to buy Armis for $7.75 billion as it bets big on cybersecurity for AI

-Christine Ji

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July 23, 2026 11:34 ET (15:34 GMT)

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