NOW · Q2 2026 Earnings

Bullish

ServiceNow

Reported July 22, 2026

30-second summary

Q2 subscription revenue of $3.877B (+24.5% YoY) cleared the prior guide's high end by $57M, cRPO grew 21.5% cc (+200bps above the +19.5% cc guide), and non-GAAP operating margin printed 29.5% — 300bps above the 26.5% guide that was supposed to absorb the Armis integration drag. Management raised the FY26 subscription revenue midpoint $15.755B → $15.770B (+$15M at midpoint) while trimming the FY subscription gross margin guide 50bps to 81%, and disclosed that ServiceNow AI ACV has already reached $1B — two-thirds of the way to the $1.5B FY target that was itself raised from $1B last quarter.

Headline numbers

EPS

Q2 FY2026

$0.90

+4.7% vs est.

Revenue

Q2 FY2026

$3.99B

+24.0% YoY

+1.4% vs est.

Gross margin

Q2 FY2026

70.5%

Free cash flow

Q2 FY2026

$0.63B

Operating margin

Q2 FY2026

4.0%

Key financials

Q2 FY2026

Metric	Q2 FY2026	Q2 FY2025	YoY	Q1 FY2026	QoQ
Revenue	$3.99B	$3.21B	+24.0%	$3.77B	+5.8%
EPS	$0.90	$4.09	-78.0%	$0.97	-7.2%
Gross margin	70.5%	81.0%	-1050bps	75.0%	-450bps
Operating margin	4.0%	29.5%	-2550bps	13.5%	-950bps
Free cash flow	$0.63B	$0.54B	+18.5%	$1.67B	-61.9%

Guidance

Guidance is issued for both next quarter and the full year. Both may appear below.

Actuals vs prior guidance

Metric	Period	Prior guide	Actual	Δ	Result
Subscription revenues	Q2 FY2026	$3.815B - $3.820B	$3.877B	+$0.057B above high end of guide	Beat
Subscription Revenue YoY Growth (constant currency)	Q2 FY2026	21% - 21.5%	24.5%	+3.0 - 3.5 pts above guide	Beat
cRPO YoY Growth (constant currency)	Q2 FY2026	19.5%	21%	+1.5 pts above guide	Beat
Operating Margin	Q2 FY2026	26.5%	29.5%	+3.0 pts above guide	Beat

New guidance

Metric	Period	Guide	YoY
Subscription revenues	Q3 FY2026	$3.975B - $3.980B	+16.6% - 17.0%
Subscription Revenue YoY Growth	Q3 FY2026	20.5% (20% constant currency)	20% - 20.5%
cRPO YoY Growth (constant currency)	Q3 FY2026	20%	—

Changes to prior guidance

Metric	Period	Prior guide	New guide	Δ	Result
Subscription revenues	FY2026	$15.735B - $15.775B	$15.760B - $15.780B	+$0.025B at midpoint	Raised
Subscription Revenue YoY Growth	FY2026	20.5% - 21% (constant currency)	22.5% (21% constant currency)	+1.5 - 2.0 pts vs constant currency prior; +2.5 pts at FX-adjusted high end	Raised
Subscription Gross Margin	FY2026	81.5%	81%	-0.5 pts	Lowered

Segment performance

Q2 FY2026

Segment	Q2 FY2026	Q2 FY2025	YoY
Subscription revenues	$3.877B	$3.113B	+24.5%
Professional services and other revenues	$0.11B	$0.102B	+7.8%

Platform metrics

Q2 FY2026

Segment	Q2 FY2026	Q2 FY2025	YoY
Current Remaining Performance Obligations (cRPO)	$13.20 billion	$10.92B	—
Remaining Performance Obligations (RPO)	$29.0 billion	$23.9B	—
cRPO YoY Growth	21%	24.5%	—
Transactions over $1M in net new ACV	123	—	—
Customers with $5M+ ACV	658	—	—
ServiceNow AI Annual Contract Value	$1 billion	—	—

Profitability

Q2 FY2026

Segment	Q2 FY2026	Q2 FY2025	YoY
Non-GAAP Subscription Gross Margin	80.5%	—	—
Non-GAAP Operating Margin	29.5%	—	—

Management tone

Tone analysis unavailable — no transcript was released with the print. What follows is drawn from the press-release qualitative statements only.

The three cited management statements — "outstanding quarter that highlights ServiceNow's broad based demand, strong execution, and operating leverage," "once again, we beat the high end of our guidance range across every topline and profitability metric," and the FY subscription raise language — represent a clear return to the confident four-way-beat cadence that characterized Q3-25 and Q4-25. Q1's Armis-integration framing had shifted the narrative defensively; this quarter's 300bps operating margin beat against a guide that supposedly already absorbed Armis suggests the integration drag was overstated in the Q1 framework, or that AI-driven efficiencies are running faster than management modeled.

The ServiceNow AI ACV disclosure — "$1 billion" reached in Q2 against a $1.5B FY target that was itself raised from $1B just one quarter ago — is the most consequential number in the print. The disclosure cadence has moved from qualitative to a quarterly hard number in three quarters, and the pace suggests the FY26 target will be raised again on the Q3 print.

The subscription gross margin walk-down is the one countervailing signal. Three consecutive 50bps FY guide cuts (82% → 81.5% → 81%) — the press release attributes the latest cut to hyperscaler mix and accelerating customer AI adoption. The Q2 actual of 80.5% printed below the just-lowered FY guide, which is the first quarter in this coverage arc where the gross margin actual has undershot the FY framework.

Answers to last quarter's watch list

Q2 non-GAAP subscription gross margin trajectory — Printed 80.5%, below the FY 81% guide that was itself lowered from 81.5%. The press release attributes the FY framework to hyperscaler mix and AI adoption acceleration.

Resolved negatively

Q2 subscription revenue vs. the $3.815-3.820B guide and cRPO cc vs. the +19.5% cc guide — Subscription revenue $3.877B beat the high end by $57M and cRPO cc came in at +21.5% (+200bps above guide). The multi-quarter cRPO cc beat pattern held rather than compressed.

Resolved positively

Q2 on-prem revenue catch-up — Press release explicitly states the 150bp Q2 subscription revenue beat was driven by "net new ACV outperformance and on-premise revenue mix coming in ahead of expectations," primarily from strong U.S. Federal demand pulling some on-prem revenue from Q3 into Q2.

Resolved positively

AI revenue progression toward the raised $1.5B FY26 target — Resolved positively and then some. ServiceNow AI ACV disclosed at $1B in Q2 — 67% of the FY target already booked with two quarters to go. This is the first quarterly ACV run-rate the company has provided.

Resolved positively

Organic vs inorganic separation at the Financial Analyst Day — Not addressed in this print; the FAD-related question was not the subject of the press release.

Continue monitoring

Operating margin Q2 print at the 26.5% guide — Non-GAAP operating margin printed 29.5%, 300bps above the guide that supposedly carried the Armis integration headwind. Either Armis drag was less severe than guided or AI-driven internal efficiencies are outrunning the framework — the press release does not decompose the beat.

Resolved positively

What to watch into next quarter

ServiceNow AI ACV progression from $1B toward the FY $1.5B target — with two quarters remaining and $1B already booked, watch whether Q3 crosses $1.5B early, prompting another FY target raise.

Q3 non-GAAP subscription gross margin vs. the 81% FY guide — Q2 printed 80.5% below the lowered framework. Watch whether Q3 recovers to 81%+ or whether a further FY guide cut materializes on the Q3 print.

Q3 subscription revenue vs. the $3.975-3.980B guide and cRPO cc vs. the +20% cc guide — the on-prem pull-forward from U.S. Federal demand into Q2 could weigh on Q3 subscription growth; watch whether the +20.5% reported / +20% cc Q3 guide already reflects that pull-forward or whether reported growth undershoots.

Q3 non-GAAP operating margin vs. the 31% guide — Q2 beat by 300bps against an Armis-loaded 26.5% guide. Watch whether the 31% Q3 guide is similarly conservative and whether FY 31.5% is quietly raised on the Q3 print.

Subscription gross margin attribution and bounds — three consecutive 50bps FY guide cuts (82% → 81.5% → 81%) attributed to hyperscaler mix and AI adoption. Watch for a transcript or analyst day explanation of whether the walk-down is bounded and whether these are transitional investments or a structural mix reset.

Customers >$5M ACV cadence — 603 → 630 → 658 across three quarters is a stable widening pace. Watch whether the count crosses 685-690 in Q3, which would confirm the top-of-pyramid concentration is accelerating rather than saturating.

Sources

ServiceNow Q2 FY2026 earnings press release — https://www.sec.gov/Archives/edgar/data/1373715/000137371526000072/erq2fy26.htm

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