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AI panic? ServiceNow says relax
ServiceNow’s latest earnings call had a very specific vibe: less “robots are coming for our jobs,” more “actually, the robots are helping us sell more software.” CEO Bill McDermott spent the call arguing that AI is a tailwind for the company, not a threat to it.
And the numbers mostly backed him up. Subscription revenue rose 19% in constant currency in the first quarter, current remaining performance obligations grew 21%, and operating margin hit 32%. Free cash flow margin clocked in at 44%, which is the kind of number that makes software investors sit up a little straighter in their chairs.
The AI money is getting real
The biggest headline wasn’t just that customers are experimenting with AI. It’s that they’re moving from “cute demo” mode into broader deployments. ServiceNow said customers spending more than $1 million grew more than 130% year over year, while Now Assist is still outperforming internal expectations.
McDermott also said the company now expects AI commitments to reach $1.5 billion this year, up from a prior $1 billion target. That’s a pretty big jump, and it suggests enterprise buyers are willing to put real budget behind AI tooling instead of just talking about it at conferences.
A partnership, plus a little geopolitics
ServiceNow also deepened its strategic partnership with Google Cloud, rolling out new AI solutions and agents for large enterprises. That matters because the enterprise AI race is becoming a three-way knife fight among the likes of ServiceNow, Microsoft, and Salesforce.
There was one wrinkle, though: the company said delayed closings on several large on-premise deals in the Middle East shaved about 75 basis points off subscription revenue growth, thanks to the ongoing conflict in the region. In other words, the business is humming, but global deal timing still has a way of throwing sand in the gears.
Why investors should care
ServiceNow raised its second-quarter and full-year subscription revenue outlook, which is usually the part where investors exhale and then immediately start asking what the next catalyst is. The short version: AI is no longer just a slide in the deck. For ServiceNow, it’s starting to look like a real revenue engine.
Big picture: if enterprise AI spending keeps shifting from “trial” to “deployment,” ServiceNow could be one of the cleaner beneficiaries in software.