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ServiceNow (NOW) Q2 2026 Earnings: AI ACV Tops $1 Billion

Steven Levine, Founder of TickerPosts and OpenClassActions.com2 min readLast reviewed

ServiceNow's Q2 2026 report offered one of the clearest signs yet that enterprise AI is moving from pilots into contracts.

Subscription revenue rose 24.5% to $3.88 billion, remaining current performance obligations grew 21%, and the annual contract value tied to AI products passed $1 billion. The company also raised its full-year subscription revenue outlook.

Quick answer

ServiceNow's Q2 earnings showed durable platform growth and increasingly measurable AI monetization. The company reported 123 deals with more than $1 million of net new annual contract value and said AI ACV exceeded $1 billion. The main investor question is whether NOW can sustain that growth while narrowing the large difference between its non-GAAP and GAAP profitability.

What stood out in ServiceNow's Q2 results?

Subscription revenue reached $3.88 billion, up 24.5%, or 23% in constant currency. Total revenue increased 24% to $3.99 billion.

Current remaining performance obligations, a measure of contracted revenue expected within the next 12 months, rose 21% to $13.2 billion. Total remaining performance obligations reached $29 billion, also up 21%. Those figures offer forward visibility, although they are not guaranteed revenue and can be affected by contract duration and timing.

Large-customer momentum remained strong. ServiceNow closed 123 deals above $1 million of net new ACV, nearly 40% more than a year earlier, and had 658 customers with more than $5 million of ACV.

Is ServiceNow making money from AI?

Management said AI products crossed $1 billion of ACV and that agentic deployments increased ninefold over nine months. ACV is more economically meaningful than a usage count because it reflects contracted value, but it still differs from revenue recognized in the quarter.

ServiceNow's opportunity is to embed agents into IT, customer-service, security, human-resources, and operational workflows that already run on its platform. That distribution advantage can reduce the friction of selling AI as an additional product rather than a separate system.

The risk is that AI makes some workflow software easier to replicate or that customers consolidate vendors and demand lower prices. Renewal rates, expansion, and recognized AI revenue will reveal which force is stronger.

What guidance did ServiceNow provide?

The company raised full-year subscription revenue guidance to $15.76 billion to $15.78 billion, representing about 22.5% reported growth and 21% in constant currency.

ServiceNow expects a 31.5% non-GAAP operating margin and 35% free-cash-flow margin for the year. The GAAP operating-margin outlook is 10%, while stock-based compensation is expected to equal roughly 15% of revenue. That gap is material for investors evaluating dilution and true owner earnings.

What should NOW investors watch next?

  • Current RPO growth should remain near the rate implied by revenue guidance.
  • AI ACV should convert into recognized subscription revenue and renewals.
  • Large-deal growth should not depend on unusually long contract terms.
  • GAAP operating margin and diluted share count should improve over time.
  • Foreign-exchange effects should be separated from underlying demand.

Bottom line

ServiceNow's Q2 2026 earnings strengthened the case that its AI products are becoming a business rather than a feature demonstration. Contracted AI value passed $1 billion, subscription revenue grew above 20%, and management raised guidance.

The remaining debate is valuation quality, not product-market fit alone. NOW investors should demand continued growth alongside better GAAP profitability and disciplined stock compensation.

This article is for informational purposes only and is not investment advice. Financial figures are based on company reports available July 24, 2026.

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