Why ServiceNow Stock Surged Today

Key Points

• ServiceNow stock rose today following the company's second-quarter earnings report.

• The enterprise software specialist beat Wall Street's sales and earnings targets for Q2, and it raised its subscription revenue forecast for this year.

• ServiceNow is seeing strong AI-related tailwinds and looks poised to continue benefiting from digital transformation trends.

• 10 stocks we like better than ServiceNow ›

ServiceNow (NYSE: NOW) stock posted gains in Thursday's trading following the company's latest quarterly report. The software specialist's share price gained 4.2% in the session and had been up as much as 9.9% early in the day's trading.

ServiceNow published its second-quarter results after the market closed yesterday, and the numbers came in better than Wall Street had anticipated. The company's report showed continued artificial intelligence (AI) tailwinds, and management raised full-year performance targets for the business.

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ServiceNow stock jumps on strong Q2 numbers

ServiceNow recorded non-GAAP (adjusted) earnings per share of $4.09 on sales of $3.22 billion in the second quarter, beating the average analyst estimate's call for per-share earnings of $3.57 per share on sales of $3.12 billion in the period. Revenue was up roughly 22% year over year, and the business closed out the quarter with remaining performance obligations of $23.9 billion -- representing growth of 25.5% on a currency-adjusted basis.

What's next for ServiceNow?

ServiceNow is seeing strong AI-related demand for its enterprise software suite, and the company has raised its performance outlook for the year on the heels of strong results in the second quarter. Management is now guiding for subscription revenue to come in between $12.77 billion and $12.79 billion. At the midpoint, the new guidance is up by $125 million compared to its previous forecast.

As a leading enterprise software provider, ServiceNow looks poised to continue benefiting from AI and digital transformation trends. While gains for the company's valuation could open the door for downside volatility in the near term, the company looks poised to deliver wins for shareholders over the long haul.

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Keith Noonan 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.