ServiceNow Inc (NYSE:NOW, XETRA:4S0) is expected to report a solid second-quarter performance, with Jefferies analysts forecasting results above guidance for key subscription metrics and a potential increase to its full-year subscription revenue outlook, supported by strong execution, early customer renewals and AI-related demand.
Ahead of the company's earnings release, Jefferies expects ServiceNow to report second-quarter subscription revenue and constant currency current remaining performance obligations (cRPO) above its guidance, helped by strong execution and customers renewing contracts ahead of planned price increases.
The firm also expects the company to meet third-quarter cRPO expectations and raise its full-year 2026 subscription revenue guidance, supported by early renewals and continued adoption of its NowAssist AI products.
Jefferies expects stronger-than-guided results to be supported by healthy partner activity, early renewals before pricing changes in Australia, improving customer decision-making in Europe, and contributions from recent acquisitions.
The firm also forecast an operating margin beat of around two percentage points, citing lower-than-expected operating expense growth excluding acquisition-related costs.
Feedback from channel partners pointed to stronger-than-expected customer renewal activity during the quarter, as some organizations sought to secure existing pricing before new product packaging and pricing took effect on July 1 in Australia.
Partners also reported growing interest in ServiceNow's NowAssist AI offering, with some enterprise customers making seven-figure commitments ahead of broader deployments. Jefferies said demand continued to be supported by IT operations management and IT service management products, while the company was also seeing success cross-selling its customer relationship management offerings.
Looking ahead, Jefferies expects ServiceNow to issue third-quarter cRPO guidance broadly in line with market expectations while increasing its full-year subscription revenue outlook to reflect stronger second-quarter performance and improved visibility into the second half of the year.
The firm added that investor reaction is likely to depend on the strength of the earnings beat and any signs that demand remains sustainable following the pull-forward of renewals ahead of price increases. Jefferies also said it continues to view the stock's risk-reward profile favorably at current valuation levels.
ServiceNow shares traded down 3% at $102 on Tuesday, down more than 33% so far this year.