ServiceNow Subscription Revenue Rises 25% as AI Contract Value Tops $1 Billion
Jul 23, 2026ServiceNow, a software company that helps large organizations manage work across departments, reported strong subscription growth as it builds artificial intelligence into its recurring revenue model.
Subscription revenue reached $3.88 billion in the second quarter of 2026, up 24.5% from a year earlier. It accounted for about 97% of ServiceNow’s $3.99 billion in total quarterly revenue.
The company said its AI offerings crossed $1 billion in annual contract value during the quarter. This measures the annualized value of customer contracts, not revenue already recognized. ServiceNow expects the figure to exceed $1.5 billion by the end of 2026.
Customer use also appears to be moving beyond early testing. ServiceNow said the number of customers with its AI agents in production has increased ninefold over the past nine months. Among customers renewing their contracts, the percentage buying agentic AI for the first time doubled from both the previous quarter and a year earlier.
Those AI products are also increasing the value of customer contracts. Chief Financial Officer Gina Mastantuono said customers choosing ServiceNow’s Pro Plus packages are adding more than 30% to their contract value compared with standard packages. Newer AI-focused packages are increasing contract values by between 20% and 30%.
The results come as investors question what AI could mean for software companies that charge by the user or seat. If AI allows businesses to complete more work with fewer employees, those pricing models could come under pressure.
ServiceNow is responding with a mix of traditional subscriptions and charges based on AI usage. The company is also positioning its platform as a place where businesses can manage AI agents and connect them with their existing systems.
Its core subscription business remains steady. ServiceNow reported a 98% customer renewal rate. It also had $13.2 billion in contracted revenue expected to be recognized over the next 12 months, up 21% from a year earlier.
ServiceNow closed 123 deals that each added more than $1 million in annual contract value, nearly 40% more deals than a year earlier. The company ended the quarter with 658 customers generating more than $5 million in annual contract value, an increase of approximately 23%.
The company raised the lower end of its full-year subscription revenue forecast by $20 million. It now expects between $15.76 billion and $15.78 billion, compared with its previous range of $15.74 billion to $15.78 billion.
Some second-quarter revenue benefited from timing. Strong demand from U.S. federal customers moved some subscription revenue that had been expected in the third quarter into the second. ServiceNow expects third-quarter subscription revenue of between $3.975 billion and $3.98 billion.
Insider Take
ServiceNow is testing an important question for subscription software companies: Can AI increase customer spending without weakening the subscription business underneath it?
The early signs are encouraging. Renewal remains high, customers are putting AI products into use and those products are increasing contract values.
Still, the $1 billion figure represents annual contract value, not recognized AI revenue. The next test will be whether that adoption translates into lasting revenue growth without putting pressure on renewals or margins.