Key Highlights

● Subscription revenues rose 24.5% year on year to $3,877 million in the quarter.

● Current remaining performance obligations reached $13.20 billion, up 21% from a year earlier.

● GAAP Net Income was $298 million, while non-GAAP net income reached $930 million.

● Third-quarter subscription guidance implies growth slowing to about 20.5% from 24.5%.

ServiceNow, Inc. (NYSE:NOW) reported second-quarter 2026 results on 22 July 2026, and the headline figure explains why the company attracts attention in enterprise software: subscription revenues of $3,877 million, up 24.5% year on year, or 23% in constant currency. Growth at that rate, on a base of nearly $4 billion a quarter, is unusual for a software group of this size and is the main reason this report is worth examining closely.

What ServiceNow does

ServiceNow provides a cloud platform that automates workflows across information technology, employee services, Customer Service and other functions of large organisations. Customers subscribe to the platform and its modules and the company has been adding generative artificial intelligence capabilities and tools to connect data across a client's systems.

The sector is highly competitive. ServiceNow competes with large suites from Microsoft, Salesforce, SAP and Oracle as well as specialist vendors. Because most Revenue is recurring, analysts watch remaining performance obligations, which show contracted revenue still to be recognised, as a guide to future growth.

The quarter in numbers

Total revenues were $3,987 million, up 24%, or 22.5% in constant currency. Current remaining performance obligations, which cover the next twelve months, were $13.20 billion, up 21%, while total remaining performance obligations reached $29.0 billion, also up 21%.

Profit measures differed sharply between accounting bases. GAAP net income was $298 million, or $0.29 per diluted share, and GAAP income from operations was $162 million, a 4% margin. On a non-GAAP basis, which excludes items such as share-based compensation, net income was $930 million, or $0.90 per diluted share, and the operating Margin was 29.5%. Operating Cash Flow under GAAP was $587 million, and non-GAAP free cash flow was $634 million, a 16% margin.

The gap between GAAP and non-GAAP results is a reminder that reported profitability depends heavily on how costs such as stock-based pay are treated.

Guidance for the rest of 2026

For the third quarter, ServiceNow guides subscription revenues of $3,975 million to $3,980 million, which implies growth of 20.5%, or 20% in constant currency, and a non-GAAP Operating Margin of 31%. For the full year it expects subscription revenues of $15,760 million to $15,780 million, growth of 22.5% or 21% in constant currency, a non-GAAP operating margin of 31.5% and a non-GAAP free cash flow margin of 35%.

These are management forecasts, not reported results. They imply that quarterly growth is expected to moderate in the second half from the 24.5% reported for the second quarter.

Risks and uncertainties

Several factors could affect delivery. Guidance implies slower growth in the second half, and any shortfall against even that lower rate would draw scrutiny. Enterprise technology budgets can tighten when economic conditions weaken, lengthening sales cycles for large contracts. Competition in AI-enabled workflow software is intensifying, and customers may choose bundled offerings from larger suites. Currency movements affect reported growth, as the gap between reported and constant-currency figures shows. The company also faces the usual risks of integrating acquisitions and maintaining security for a platform that holds sensitive corporate data.

The Margin Question Behind the Growth

The third-quarter report, due in the autumn, will show whether subscription revenues land within guidance and whether current remaining performance obligation growth holds close to the 19.5% the company has projected. The trajectory of the GAAP operating margin, which was 4% in the second quarter, will indicate how quickly the Business converts revenue growth into reported profit. Free cash flow deserves attention: the company guides to a 35% non-GAAP free cash flow margin for the full year, against the 16% margin reported in the second quarter, although the two figures cover different periods. In the release, chief executive Bill McDermott described ServiceNow as the fastest-growing major enterprise software and Cybersecurity company.