What Happened?
Shares of enterprise workflow software maker ServiceNow (NYSE: NOW) jumped 3.9% in the afternoon session after the company reported strong second-quarter financial results that surpassed analyst expectations for both revenue and earnings, and raised its full-year guidance. The company posted revenue of $3.22 billion and adjusted earnings per share of $4.09, comfortably beating analyst forecasts of $3.12 billion and $3.57, respectively. Subscription revenues climbed 22.5% year-over-year to $3.11 billion, a performance the company attributed to strong momentum in Artificial Intelligence.
Specifically, ServiceNow noted that its AI-related deals increased by 50% from the previous quarter. In light of the strong performance, the company boosted its full-year subscription revenue guidance by $125 million, signaling confidence in its continued growth trajectory.
After the initial pop the shares cooled down to $989.37, up 3.5% from previous close.
Is now the time to buy ServiceNow? Access our full analysis report here, it’s free.
What Is The Market Telling Us
ServiceNow’s shares are somewhat volatile and have had 12 moves greater than 5% over the last year. In that context, today’s move indicates the market considers this news meaningful but not something that would fundamentally change its perception of the business.
The previous big move we wrote about was 13 days ago when the stock dropped 3.2% on the news that the Trump administration announced intentions to impose a 35% tariff on many goods imported from Canada. This move is far more than a typical trade dispute; it targets the United States' largest and most deeply integrated trading partner. Canada is not merely a neighbor but a critical component of North American supply chains, particularly in sectors like automotive, energy, and critical minerals. This move has sparked concerns about potential retaliatory actions and a wider impact on the North American economy, leading to a risk-off sentiment among investors. The S&P 500, Dow Jones Industrial Average, and Nasdaq all opened lower, pulling back from recent record highs and heading for their first weekly loss in three weeks.
ServiceNow is down 6.2% since the beginning of the year, and at $989.37 per share, it is trading 15.5% below its 52-week high of $1,170 from January 2025. Investors who bought $1,000 worth of ServiceNow’s shares 5 years ago would now be looking at an investment worth $2,327.
Today’s young investors won’t have read the timeless lessons in Gorilla Game: Picking Winners In High Technology because it was written more than 20 years ago when Microsoft and Apple were first establishing their supremacy. But if we apply the same principles, then enterprise software stocks leveraging their own generative AI capabilities may well be the Gorillas of the future. So, in that spirit, we are excited to present our Special Free Report on a profitable, fast-growing enterprise software stock that is already riding the automation wave and looking to catch the generative AI next.
