ServiceNow raises annual subscription revenue forecast on AI-driven tools demand
Businesses are widely adopting cloud-based enterprise solutions from vendors including ServiceNow, Salesforce (CRM.N), opens new tab and Freshworks (FRSH.O), opens new tab to streamline operations and boost productivity amid the ongoing AI boom.
ServiceNow projected its third-quarter subscription revenue above Wall Street estimates, despite economic uncertainty due to changing U.S. trade policies and Trump administration's cost-cutting measures that led to contract cancellations and delays.
The Santa Clara, California-based company, which in March announced the acquisition of AI firm Moveworks for $2.85 billion, said the ongoing budget constraints among U.S. federal agencies are expected to persist through the current quarter.
ServiceNow has signed contracts with six new customers in the U.S. public sector, CEO Bill McDermott said in an interview.
The company's planned Moveworks acquisition is under regulatory review by the U.S. Justice Department, he added.
ServiceNow said it was following the relevant procedures as required and expects the deal to close in the second half of the year or early 2026.
The company said that a larger-than-usual number of customer contracts are set to expire and will be renewed in the fourth quarter, adding that this is expected to have a 200 basis points negative impact on its current remaining performance obligations in the third quarter.
The company raised its annual subscription revenue forecast to between $12.78 billion and $12.80 billion, compared with its prior expectations of between $12.64 billion and $12.68 billion.
Its third quarter subscription revenue forecast of $3.26 billion to $3.27 billion exceeds analysts' average estimate of $3.20 billion, according to data compiled by LSEG.
ServiceNow's revenue of $3.22 billion for the quarter ended June 30 surpassed estimates of $3.12 billion.
Adjusted profit per share of $4.09 also beat estimates of $3.57 for the second quarter.
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