Why ServiceNow Stock Is Surging Today

ServiceNow (NYSE: NOW) stock is making big gains in Thursday's trading. The software company's share price was up 15.1% as of 1:30 p.m. ET, according to data from S&P Global Market Intelligence .

ServiceNow reported second-quarter earnings results after the market closed yesterday, posting sales and earnings that beat Wall Street's expectations for the period. The business recorded non-GAAP (adjusted) earnings per share (EPS) of $3.13 on sales of $2.63 billion. For comparison, the average analyst estimate had called for the business to post adjusted EPS of $2.84 on revenue of $2.61 billion.

Service now delivers key wins in Q2

ServiceNow's subscription revenues continued to expand, rising 23% on a currency-adjusted basis and reaching $2.54 billion. The company closed out the period with 88 deals worth over $1 million in annual contract value in Q2, up 26% year over year.

Investors are also bullish on the generative artificial intelligence (GenAI) story here. The company highlighted beneficial impacts that AI is having across its enterprise software platform and said that it intends to "reinvent every workflow, in every company, in every industry with GenAI at the core."

ServiceNow closed out the quarter with $18.6 billion in remaining performance obligations -- a measure that reflects work that has been contracted for but not yet delivered as revenue. On a currency-adjusted basis, RPO was up 31.5% from Q2 2023.

Wall Street like's ServiceNow's guidance

In addition to its strong Q2 performance, ServiceNow also delivered encouraging forward guidance. For the current quarter, the company is guiding for sales to come in between $2.66 billion and $2.665 billion -- suggesting growth between 20.25% annual growth at the midpoint. The company also said that it anticipated an operating income margin of 29.5%.

For the full-year period, ServiceNow expects subscription revenues to rise to between $10.575 billion and $10.585 -- good for growth of 22%. The company also said that it expects an 84.5% gross margin for the segment, and it anticipates an overall operating income margin of 29.5% and a free-cash-flow margin of 31%.

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 .