ServiceNow Beats Q2, Lifts cRPO Outlook
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- ServiceNow posted adjusted EPS of 90 cents (up from 82 cents a year earlier) on revenue of $4 billion, beating analyst estimates of 86 cents and $3.9 billion; revenue grew 24% year-over-year
- cRPO hit $13.2 billion, up 21% YoY, exceeding both ServiceNow's prior guidance and Wall Street projections
- The stock swung 4.6% higher in late trading after closing down 6.5% during the regular session
- The $7.8 billion Armis acquisition closed in April and is now dragging on earnings, accompanied by a $4 billion short-term loan maturing in October with a six-month extension option
- ServiceNow's subscription renewal rate held at 98%, unchanged from a year earlier, a closely watched signal that AI agents aren't yet displacing ITSM seats
- Q3 guidance was mixed: cRPO came in above views, but projections for subscription revenue and adjusted operating margin fell short; full-year adjusted gross margin ticked lower
- CEO Bill McDermott told the call the company is "in the bull's eye of AI, cybersecurity, workflow orchestration, integration, and automation," as ServiceNow reorganizes around a hybrid pricing model layering AI consumption revenue on top of user subscriptions
Why it matters: The beat signals ServiceNow is holding up better than feared against the AI-disruption narrative, but mixed Q3 guidance on subscription revenue and margin shows the Armis deal and AI pivot are already compressing profitability; a stable 98% renewal rate buys time, while the next quarter's sub-revenue guide is the real test of whether agents are eating ITSM seats.
