“We expect subscription gross margin of 81%, reflecting more customers utilizing our hyperscaler partnerships as well as accelerating AI adoption.”

In context

“Gina Mastantuono (President and Chief Financial Officer): Thank you, Bill. Q2 was an 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 top line and profitability metric. AI net new ACV growth continues to outpace expectations. Our AI control tower is supercharging our security and risk business and ITOM is seeing strong demand tailwinds for the CMDB to serve as an essential governance and data foundation. Simply put, the momentum across the portfolio continues to build and we remain on track to deliver another exceptional year. Q2 subscription revenues were $3.877 billion, growing 23% year-over-year in constant currency and 150 basis points above the high end of our guidance. RPO ended the quarter at approximately $29 billion, representing 22% year-over-year constant currency growth with an increase in average customer contract duration. Current RPO was $13.2 billion, representing 21.5% year-over-year constant currency growth. That's a 200 basis point beat versus our guidance. Across our workflows, we saw widespread demand. Technology workflows had 50 deals over $1 million, including nine deals over $5 million. The combination of Armis and Vesa has had a strong pull effect on our core. ITSM was in 15 of our top 20 deals. ICON had an outstanding quarter in 18 of our top 20 deals with 14 deals over $1 million. Our security and risk solutions were in 16 of our top 20 deals, also with 24 deals over $1 million. CRM and industry workflows were in 16 of our top 20 deals with 15 over $1 million, driven by sustained momentum in CPQ and sales and order management. Core business workflows had 12 deals in the top 20 with a blockbuster 24 deals over $1 million, driven by strong demand for Employee Works. Creative workflows had 18 deals in the top 20 with 14 over $1 million. From an industry perspective, business and consumer services led the way with net new ACV growing over sixfold year-over-year. Education posted impressive growth, surpassing 125%, followed by telco and media at nearly 40% year-over-year. Manufacturing also delivered strong growth in the quarter. Our renewal rate was a best-in-class 98% in Q2, underscoring the durability of our customer relationships. We ended the quarter with 658 customers generating over $5 million in ACV with 32 more customers crossing the $20 million threshold since last year. As customers scale, they are consolidating more on the ServiceNow AI platform demonstrated by 18 of our top 20 deals including eight or more products. ServiceNow AI continued to outperform expectations in Q2 with ACV crossing over $1 billion and net new ACV growth accelerating sequentially, growing over 40% quarter-over-quarter. Deals including five or more ServiceNow AI products grew 5.5x year-over-year which drove a tripling of million-dollar-plus deals. In addition, the number of customers with agentic AI in production has increased ninefold over the last nine months — a leading indicator for the future consumption opportunity. While still early, we're already tracking ahead of our target for AI to reach 30% of ACV by 2030. As Bill noted, our new AI-native SKUs are making our agentic solutions more accessible across the customer base, as evidenced by deal volume amongst first-time ServiceNow agentic AI buyers growing over 45% year-over-year. What's more, upgrades to our new AI-native SKUs are driving price uplift in line with the 20% to 30% framework that we laid out at our Financial Analyst Day. Employee Works, our AI front door for the enterprise workforce, continued to build strong momentum with deal volume growing over 150% quarter-over-quarter. Another good example of our acquisitions amplifying the core. The robust attach rates of AI across the platform are also driving our data and analytics business. Raptor DB Pro deal volume grew 80% year-over-year again in Q2, and workflow data fabric was in 17 of our top 20 deals. Turning to profitability. Non-GAAP operating margin was 29.5%, 300 basis points above our guidance, driven by the revenue outperformance and timing of spend, primarily in marketing. Our free cash flow margin was 16%. Together, these results continue to demonstrate our ability to drive a strong balance of world-class growth, profitability and shareholder value. Moving to our outlook. For the year, because Q2 net new ACV outperformed, we're raising our full-year guidance. Part of that outperformance was due to strong U.S. federal demand, which shifted some on-prem revenue from Q3 to Q2. This is simply about timing. I'm very confident in our Q3 and full-year guidance. For 2026, we are raising our subscription revenues by $15 million at the midpoint from $15.755 billion to $15.770 billion, representing 21% year-over-year growth on a constant currency basis. We expect subscription gross margin of 81%, reflecting more customers utilizing our hyperscaler partnerships as well as accelerating AI adoption. We expect operating margin of 31.5% and free cash flow margin of 35% and GAAP diluted weighted average outstanding shares of 1.04 billion. For Q3, we expect subscription revenues between $3.975 billion and $3.980 billion, representing 20% year-over-year growth on a constant currency basis. We expect CRPO growth of 20% on a constant currency basis. We expect operating margin of 31% and we expect 1.05 billion GAAP diluted weighted average outstanding shares for the quarter. In closing, Q2 was another outstanding quarter in an environment where most enterprises are still searching for AI's ROI. ServiceNow is the platform delivering it. In my conversations with CFOs, the question has become simple: where is the return? They've watched budgets burn on pilots that demo beautifully and never touch the P&L. ServiceNow doesn't just deploy AI; our AI control tower provides a single view to discover, govern and secure every AI system and tie every agent to a real ROI. AI that only advises is a cost; AI that completes the work is a return. On our platform, agents don't just reason — they take action. And because we have the contextual data, every action is anchored in the live governed reality of the enterprise — turning probabilistic AI into deterministic, reliable outcomes. That's how AI moves from an operating expense to operating leverage. Customers aren't paying us for tokens. They're paying for resolutions. That's why enterprises are choosing ServiceNow to convert AI ambition into measurable ROI. Finally, to our teams around the world, thank you. Your execution is why the world works with ServiceNow and why we are more confident than ever in the road ahead. With that, I'll open it up for Q&A.”