ServiceNow Stock Up 4% After Guidance Raise On Agentic AI Growth

Forbes

2 days ago

Agentic AI drove up ServiceNow's guidance and the stock rose 4.8% in July 24 morning trade.
SUN VALLEY, IDAHO - JULY 08: ServiceNow CEO Bill McDermott arrives at the Sun Valley Lodge for the ... More Allen & Company Sun Valley Conference on July 8, 2025 in Sun Valley, Idaho. Every year, some of the world's wealthiest and most powerful figures from the media, finance, technology, and political spheres converge at the Sun Valley Resort for the exclusive week-long conference hosted by boutique investment bank Allen & Co. (Photo by) Getty Images Key Facts
ServiceNow's second quarter revenue: $3.22 billion — 23% more than last year and $100 million ahead of the London Stock Exchange Group consensus, noted CNBC .
ServiceNow's Q2 adjusted earnings per share: $4.09 — 63 cents above LSEG view, CNBC reported.
ServiceNow's Q2 continuing remaining performance obligations: $10.92 billion — up 25%, according to CNBC .
2025 subscription revenue guidance: $12.79 billion — $10 million more than analysts' estimate and $150 million more than ServiceNow's previous estimate, noted Yahoo! Finance .
ServiceNow — whose shares are down 5% in 2025 — beat second quarter growth expectations and raised guidance due to 'artificial intelligence adoption,' reported CNBC.
Should you buy the stock? The answer is yes — only if this pattern of beating and raising continues. Despite a potential 2% hit due to tariffs and government budget cuts, according to CNBC , here's why ServiceNow stock could rise: Companies are adopting agentic AI which contributed to ServiceNow's boost to guidance, about which I wrote in my book, Brain Rush .
. ServiceNow is embedding agentic AI into new business processed — notably customer service, field service and supply chain management — which provides new growth opportunities, noted Investor's Business Daily .
My July 24 interviews with ServiceNow President of Global Customer Operations, Paul Fipps, and President and Chief Financial Officer, Gina Mastantuono reveal the company could achieve expectations-beating growth as the company's agentic AI enables customers to boost productivity in employeee and customer service and demand soars in India and the Middle East.
ServiceNow exceeded investor expectations for growth and profitability and raised its guidance for 2025. 'Every business process in every industry is being refactored for agentic AI,' ServiceNow chair and CEO Bill McDermott in a release.
The company also disclosed growth glitches. Seasonality and more customers renewing contracts in the final quarter will reduce third quarter CRPO by 2 percentage points, the company said.
Moreover, U.S. government agency budget changes could affect results 'While federal business is a bit uncertain today versus a year ago, we're navigating it well, and we feel confident that our guidance reflects any potential changes that we're seeing,' Mastantuono told CNBC .
This is a change from ServiceNow's view of the future in April. A few weeks after President Donald Trump launched government job cuts and promulgated tariff confusion, ServiceNow saw opportunity.
As companies aim to "optimize their supply chains amid recent tariff announcements and federal clients aim to boost efficiency amid government spending cuts, the platform is operating in a best-case-scenario environment,' McDermott said according to my April Forbes post. How Agentic Ai Demand Is Boosting Servicenow's Growth
ServiceNow was enjoying growth from AI last April and sees that growth is continuing. "Our AI business quadrupled year over year and our average deal size increased by a third.' Mastantuono told me in April.
ServiceNow remains optimistic about growth due to enterprise AI spending. "We are rocking,' ServiceNow CEO Bill McDermott told Yahoo! Finance. In pursuit of margin-boosting cost savings, ' AI spending will be up significantly into year-end," he added.
ServiceNow says it does a better job of making agentic AI — prompting an AI chatbot to, say, plan, book and pay for a vacation to Paris and letting the AI agent pick the best hotels, restaurants, and visits — payoff.
'We improve productivity in a range of 50% to 85%,' Fipps told me. 'Our AI platform for business transformation completes work in the workflow. We manage the complexity of enterprise architecture — bringing data from enterprise resource planning, customer relationship management, and other systems into the cloud and using NowAssist to deliver intelligent workflow.'
For instance, ServiceNow saves time and reduces the cost of fulfilling employee software purchase requests. One of ServiceNow's largest brand customers receives between 2,000 and 4,000 employee requests for software each month.
'Using our AI agents, the customer matches the software purchase to the individual employee's needs and fulfills the order within two to four hours,' Fipps explained. 'This is a big improvement from a process that formerly took two to four days to complete and over provisioned because it did not know each employee's needs,' he added.
ServiceNow sees big growth opportunities in CRM and in the Indian market. 'Sales order management — front to back end — is a fast growing business,' Fipps said. 'We already get $1.4 billion from our CRM business and after acquiring Logik.AI for configuring, pricing, and quoting we got nine deals in June. It is a huge growth factor,' he concluded.
ServiceNow expects explosive growth over the next three years from India. Between 2024 and 2027, ServiceNow forecasts 115% growth from $130 million in 2024 annual contract value to about $280 million in 2027 ACV, according to a July 24 email from a company spokesperson.
Customers in the Indian banking, manufacturing, and telecommunications industries are 'pulling us in,' said Fipps. 'Our brand is becoming much more relevant across the globe. Customers are realizing the ServiceNow platform can revamp the employee experience and CRM,' he concluded. What Cfo And Analysts Are Saying About Servicenow's Growth
ServiceNow's CFO expressed optimism for the company's performance and prospects. 'Q2 was a spectacular quarter across the board, as we significantly beat the high end of our guidance across all topline and profitability metrics,' Mastantuono said according to a company statement.
'Now Assist continued to surpass net new ACV expectations, fueled by an increase in both deal volume and size quarter‑over‑quarter, putting us firmly on track to hit our $1 billion ACV target by 2026. With a robust pipeline and expanding market opportunities, including strong momentum in CRM, we are well‑positioned for the second half of the year,' she added.
Analysts — with an average price target of $1,096 — see 10% upside in the stock, noted TipRanks . Here are two analysts who share her optimism: "We expect NOW to trade up given the solid Q2 beat against a pretty low bar with investor sentiment extremely cautious on application software and NOW's high Federal exposure," Citi analyst Tyler Radke told Yahoo! Finance .
. "ServiceNow delivered a solid quarter and outlook, surpassing what was a high bar of investor expectations in our view for Q2," said RBC Capital analyst Matthew Hedberg in a report feature by IBD .
ServiceNow's CFO highlighted three significant growth opportunities. 'AI plus data plus workflows is a game changer for the enterprise because it produces real business outcomes at scale,' she told me.
'18 of our top 20 deals came from NowAssist — which includes all our AI stock keeping units. We had 50% growth in deal volume and we won our biggest NowAssist deal — of more than $20 million,' added Mastantuono.
'We had remarkable customer transformations with Starbucks, ExxonMobil, Intuit, and Nvidia — which is using our product to personalize employee support with voice response in seconds. Front office transformation — fully integrated selling, fulfillment and service is a huge total addressable market. So is governance, security and risk management,' she concluded.