Why ServiceNow Soared 12% Higher Last Month
Key Points
It coincided with the company's release of an impressive second-quarter earnings report.
This was a beat-and-raise quarter that drove investor morale notably higher.
Enterprise software company ServiceNow (NYSE: NOW) was a winner in July. This was mostly because it delivered a beat-and-raise second quarter during the month, although a general rebound in beaten-down software stocks also helped. All told, across all of July ServiceNow's share price rose by 12%.
Hot growth now
ServiceNow's earnings report was impressive from the get-go. It began with the company's note that it beat its own guidance on several key metrics, including revenue growth and profitability.
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Total revenue for the second quarter was just under $3.99 billion, up a meaty 24% year over year. This was aided to no small degree by subscription revenue, which rose by nearly 25% to hit almost $3.88 billion. Investors prize subscription revenue, as it tends to be steady and consistent.
Although net income not under generally accepted accounting principles (non-GAAP, or adjusted) growth didn't quite reach the double digits, it was nevertheless substantial. The metric rose by 9% to $930 million, or $0.90 per share.
Both line items were comfortably above the consensus analyst estimates. Professional ServiceNow watchers were modeling $3.93 billion on the top line, and $0.86 per share for adjusted net profit.
Although ServiceNow is broadly a software company -- and was therefore caught up in the recent rout -- it's been quite the adopter of artificial intelligence (AI) to help power its solutions. The company said agentic deployments within its core platform increased ninefold in only nine months.
Organic and acquired growth
Showing cautious optimism, ServiceNow slightly raised its annual guidance for that all-important subscription revenue line. The company now anticipates earning $15.76 billion to $15.78 billion for this in all of 2026, up from its previous forecast of just under $15.74 billion to a bit below $15.78 billion. The midpoint of the new range is almost 23% higher than the actual 2025 tally.
As July barreled to a close, many market players started to reconsider their bearish stance on software stocks. Some realized that such titles might prove resilient in the AI revolution, not least because quite a few (such as ServiceNow) are successfully embracing rather than fighting the technology.
ServiceNow combines an already compelling suite of offerings with innovative approaches to enhancing them, as evidenced by its acquisition of the cybersecurity company Armis earlier this year. This shows me that the company is constantly on the hunt for new sources of growth rather than resting on its laurels.
This is a solid company in the enterprise software realm, and well worth consideration for any stock portfolio.
Eric Volkman has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends ServiceNow. The Motley Fool has a disclosure policy.