Goldman says ServiceNow is writing a totally new playbook

Seven years ago, connected an net call, ServiceNow CEO Bill McDermott promised the institution would go the defining endeavor bundle institution of the 21st century, according to a transcript published by Benzinga.

That committedness rested astir wholly connected IT summons routing, the unglamorous bundle that logs a breached laptop oregon a locked account. It was a humble instauration for specified a ample claim.

This twelvemonth tested that committedness successful a mode McDermott could not person foreseen. Enterprise bundle spent the archetypal fractional of 2026 gripped by what Fortune called a "SaaSpocalypse," the fearfulness that AI agents could simply execute the enactment bundle licenses utilized to gate.

If an autonomous cause tin resoluteness a enactment summons connected its own, the logic went, wherefore support paying per spot for the bundle that utilized to way it to a human?

ServiceNow absorbed that fearfulness directly. Shares had fallen adjacent to 50% implicit the anterior twelvemonth heading into the company's 2nd 4th report. Wall Street was not debating whether ServiceNow made bully software. It was debating whether AI made the full subscription exemplary obsolete.

The institution reported second-quarter results connected July 22, beating estimates connected revenue, earnings, and bookings, according to the company's net release.

"Q2 was an outstanding 4th that highlights ServiceNow's wide based demand," said ServiceNow President and CFO Gina Mastantuono successful the release.

Subscription gross roseate 24.5% twelvemonth implicit twelvemonth to $3.877 billion, and NOW shares initially fell earlier recovering aft hours arsenic investors digested the numbers.

Two days later, Goldman Sachs raised its terms people connected the banal to $152 from $145 portion keeping a bargain rating, according to a Goldman Sachs probe enactment shared with TheStreet.

That people reboot did not thin connected the subscription beat. Goldman analysts led by Gabriela Borges wrote that the azygous biggest operator of a ServiceNow rerating volition beryllium whether the institution proves its relevance wrong the endeavor AI stack, not whether it keeps beating quarterly guidance. That favoritism reframes what investors should really beryllium tracking.

The ServiceNow $1 cardinal AI milestone

ServiceNow's AI yearly declaration worth crossed $1 cardinal for the archetypal clip this quarter, and Goldman noted the institution reiterated assurance successful exceeding a $1.5 cardinal people by the extremity of 2026.

That gait besides puts ServiceNow up of its ain semipermanent extremity of AI reaching 30% of full ACV by 2030.

Goldman views that AI gross arsenic much invaluable than a comparable dollar of halfway workflow revenue, due to the fact that AI deployments deepen lawsuit entrenchment and make country for aboriginal depletion growth.