ServiceNow, Inc. (NOW) Earnings Call Transcript & Summary

Ladies and gentlemen, thank you for standing by. My name is Krista, and I will be your conference operator today. At this time, I would like to welcome everyone to the ServiceNow Second Quarter 2026 Earnings Conference Call. [Operator Instructions] We will now turn the conference over to Darren Yip, Senior Vice President, Investor Relations and Market Insights. Darren, please go ahead.

Good afternoon, and thank you for joining ServiceNow's Second Quarter 2026 Earnings Conference Call. Joining me are Bill McDermott, our Chairman and Chief Executive Officer; Gina Mastantuono, our President and Chief Financial Officer; and Amit Zavery, President, Chief Product Officer and Chief Operating Officer. During today's call, we will review our second quarter results and discuss our guidance for the third quarter and full year 2026. Before we get started, we want to emphasize that the information discussed on this call, including our guidance, is based on information as of today and contains forward-looking statements that involve risks, uncertainties and assumptions. We undertake no duty or obligation to update such statements as a result of new information or future events. Please refer to today's earnings press release and our SEC filings, including our most recent 10-Q and 10-K for factors that may cause actual results to differ materially from our forward-looking statements. We'd also like to point out that we present non-GAAP measures in addition to and not as a substitute for financial measures calculated in accordance with GAAP. Unless otherwise noted, all financial measures and related growth rates we discuss today are non-GAAP except for revenues, remaining performance obligations, or RPO, current RPO and cash and investments. To see the reconciliation between these non-GAAP and GAAP measures, please refer to today's earnings press release and investor presentation, which are both posted on our website at investors.servicenow.com. A replay of today's call will also be posted on our website. With that, I'll turn the call over to Bill.

Thank you very much, Darren, and thanks, everybody, for joining today's call. I looked at the transcript from an earnings call 7 years ago. And back then, we said ServiceNow would be the defining enterprise software company of the 21st century. So thought I'd give you a report out since then, we beat expectations in every quarterly report, expanded the profitability and free cash flow of the company, quintupled our total addressable market accelerated 6 of our own unicorns to billion or multibillion-dollar businesses, processed billions of workflows and trillions of transactions, grew the partner ecosystem globally, architected the most complete AI control tower for the enterprise, maintained our best-in-class renewal rate, increased our brand value, offered our customers deep enterprise context, unlimited choice and differentiated capabilities. And of course, we set a course to $32 billion in revenue in 2030, operating at the Rule of 60 and beyond. So today, we're adding a stunning Q2 print to this track record. Subscription revenue growth was 23% in constant currency, 1.5 points above the high end of our guidance. cRPO growth was 21.5% in constant currency, more than 2 points above our guidance. Operating margin was 29.5%, 3 points above our guidance. We had 123 deals greater than $1 million in net new ACV, up 40% year-over-year. ServiceNow AI ACV exceeded expectations again, surpassing $1 billion, keeping us on track to beat our target of $1.5 billion ACV by the end of 2026. We're feeling real good about it. What does it all mean? We are who we said we were. The path to value isn't just making AI, it's deploying AI securely across the enterprise. IDC forecast spending on AI software is going to grow 53% this year, 17% faster than AI hardware. Whichever chip wins, whichever lab wins, whichever price per token regime prevails, the enterprise needs one governed layer of record for work and ServiceNow offers needed certainty in an uncertain stack. Our platform is optionality on all AI outcomes, not a bet on anyone. We're in the bull's eye of AI, cybersecurity, workflow orchestration, integration and automation. That's why we're growing fast. It's why we're only just getting started. We are who we said we were. Over the past several months, we've addressed a number of really good questions during meetings with investors. Today, I'd like to give every investor the professional courtesy of those exchanges. One question we regularly get, is ServiceNow becoming a cybersecurity company? Here's the answer. ServiceNow already was a $1 billion-plus cybersecurity business. Today, our risk and security business is the fastest growing of the top 10 cyber companies in the enterprise. I'll make it very clear. We now have a 10-figure cybersecurity business that's growing faster than all the other top cybersecurity companies. We're building the world's most integrated end-to-end security platform across cyber, risk and compliance agentic incident response, exposure management, identity and access security, cyber physical security and continuous vulnerability detection. The security stack sits on top of our ITSM and ITOM core infrastructure. So think about it, AI control tower plus Armis plus Veza. Our customers want every AI in the enterprise to be visible, governed and secured in one command center. Native or third party, they don't want any blind spots. There's 2.2 billion agents entering the enterprise globally. That's 2.2 billion new identities, 1/4 of today's human population. Veza maps access across human, machine and AI identities. We'll have 40 billion connected devices in the world in the next 4 years. Armis already tracks 7 billion of those devices in real time. Many customers, especially in the public sector, seek out Armis because government policies require state-of-the-art visibility. The attack surface is exploding. Every ungoverned asset and identity multiplies the blast radius. When you integrate awareness and identity with the actionability of the ServiceNow platform, you have a complete 360-degree capability to secure the enterprise. It's highly telling that the AI control tower is already gaining traction with our partner ecosystem. In fact, one global services firm is leveraging this portfolio to help their clients rapidly triage their cybersecurity activity. They're hunting down problems with ServiceNow and the others are rapidly following suit. So once again, this is the eighth largest cybersecurity business in the enterprise and the fastest growing, and we are just getting started. Another question we get is, when will customer deployment of AI mark an inflection point for ServiceNow's growth? Here's the answer. It already has. The percentage of renewal customers purchasing Agentic AI for the first time doubled quarter-over-quarter and year-over-year. So customers that weren't already on the AI journey are signing up fast. Most customers are now completely allergic to anything that looks like a project. They only want deterministic. ServiceNow only does deterministic. That's a big reason why customers with agentic AI in production have grown 9x over the last 9 months. So here's a few of many examples. The Department of Air Force is expanding its use of the ServiceNow AI platform. The deployment will unify IT operations and enterprise visibility. Experian is using ServiceNow to automate intelligence at scale. We will also integrate our platforms, embedding Experian's data and decisioning into existing ServiceNow workflows. In a 5-year deal and many deals are going longer, you should see that in the CRPO and the RPO, by the way. Maybank, Malaysia's largest bank, will leverage ServiceNow to establish a resilient operations center to fortify security and resilience. The U.S. federal government's largest IT contractors and agencies are now consolidating asset discovery and security response on ServiceNow. One agency is using Armis to move from asset blind incident response to comprehensive threat hunting. Hitachi will standardize enterprise asset management across its global businesses on ServiceNow. Additionally, we're partnering with them to advance the Hitachi Intelligent infrastructure monitoring solution. The city of Raleigh became the first local government to deploy ServiceNow's L1 AI specialist in production with no in-house AI engineering bench behind it. That's right. It's on its own. The city is moving to become fully autonomous one ticket category at a time. Many enterprise customers are at various stages of the same journey. They are progressing from supervised to autonomous operations. A large global consumer goods company partnered with ServiceNow to launch its first Agentic AI use case in ITSM to triage workflows. The customer rapidly deployed a repeatable governance first blueprint for future agentic use cases. A leading global food and beverage company found itself with AI agents proliferating across 5 platforms simultaneously with no unified way to govern them. Their CTO has a mandate. No agent, no agent goes live without clearing governance, risk, value validation and observability. AI Control Tower went live this spring. They can now see in real time who was building AI and whether it had been approved, the value for them was immediate. It's worth highlighting IT operations management continues to be a source of strength to ServiceNow, extending its outperformance in Q2 with attach rates to ITSM continuing to rise year-over-year. Our CMDB gives customers a trusted system of record for their infrastructure, applications, services and dependencies. ServiceNow delivers the intelligence layer and the infrastructure it runs on. We also get asked, is ServiceNow gaining traction in the CRM marketplace? Here's the answer. The market participants in the enterprise are very good. They're really good companies. And let me be clear, they're not going away. Having said that, we're doing very well. Already, we're a $2 billion ACV business. CRM and ACV growth accelerated again on a year-over-year and quarter-over-quarter basis. Sales CRM average deal size doubled year-over-year. We're on track to execute over 2 billion service CRM cases this year. In addition, partners are increasingly positioning ServiceNow as an operational CRM platform, opening executive conversations across the C-suite. For example, in Q2, a partner closed a full front office replacement of a major CRM deployment in just 2 months. A leading North American automotive marketplace outgrew its legacy CPQ provider. It couldn't handle the volume or complexity of the business after 5 vendors failed to deliver. ServiceNow will help their sales teams achieve the speed and accuracy to operate at scale. American software leader selected ServiceNow to modernize a highly customized quoting environment. Our ability to connect CPQ with broader workflows, customer data and service operations was a key differentiator in the win. A leading North American telecom infrastructure provider selected us to unify commercial and field operations on a single platform. ServiceNow will scale "volume 3x with no added headcount and cut repricing from weeks to hours." A regional financial institution consolidated its loan origination workflow onto ServiceNow's unified CRM platform, replacing legacy point solutions. Hey, here's the big one. Voice is the next frontier, and we're winning it. We just proved something extraordinary. A large airline has gone all in running their customer service voice calls on ServiceNow's voice AI CRM agents. This is live, in production and handling 5 million annual voice calls in year 1 alone. The results speak for themselves. Customer satisfaction is off the charts. We also get asked about ServiceNow's role in the HR stack. Here's the answer. EmployeeWorks is the strategic entry point for enterprise-wide employee experiences. This combines Moveworks conversational AI with ServiceNow workflows to create a single place to search, self-serve and take action across HR, IT and all workplace services. As Fortune 500 customers adopt EmployeeWorks, we're seeing it pull through broader HR and employee experience opportunities, a similar pattern to what's happening in the CRM business. We get asked about the industry dynamics in enterprise AI. Here's the answer. Innovating for the enterprise is like politics. As you may have noticed, it's pretty easy to make noise, hard to make progress. One of the reasons Knowledge 2026 was the biggest we ever hosted is because customers are desperate to make real progress with a proven innovator they can trust. Sessions on ITSM, ITOM and AI Control Tower were all oversubscribed because the influx of AI creates more activity for IT, not less. Customers demoed our latest product releases, including new AI specialists, specialists for IT, CRM, employee service and security. They learned about ServiceNow Action Fabric. This enables any agent, Claude, Copilot or homegrown to tap directly into secure, governed enterprise actions headlessly. With so much of a data mess, they wanted to understand ServiceNow's context engine and autonomous data analytics, which resolve data fragmentation across systems. With interest in ServiceNow rising, our innovation velocity is accelerating to meet the opportunity. For example, we have a big announcement coming very shortly, a business model evolution that expands our TAM with AI-native products. This new offering will be a conversational service desk experience, no tickets and AI-coded automation. In a new product-led motion, we're targeting the Fortune 500,000, many of whom we expect to replace their legacy offerings and bypass the start-ups, stop waste and time. We already have several customers in beta and soon will be GA, that's generally available. This is the first of many net new AI native products we'll be bringing to market in the weeks to come. Our Dynamite engineering team is on fire. Another area of real progress for customers is the expansion of our strategic partnerships, deeper integration of ServiceNow AI Control Tower and Microsoft Agent 365, extended Agentic AI governance from desktops to data centers with Project Arc and new agent secured by the NVIDIA OpenShell Runtime and governed by ServiceNow AI Control Tower, enhanced collaboration between ServiceNow's AI native FTEs and industry-led Accenture FTEs. There are too many to cover here. The momentum is everywhere. Here's a rapid fire round for you. Are we worried about seat compression? Not at all. Our addressable user base is growing and 50%, 5-0 of our net new business is already non-seat-based. We keep seat-based pricing because customers prefer it for predictability, particularly now where a lot of pricing out there has been less than predictable. Are customers going to build their own? I've yet to meet a customer who would even consider it. The best tech leaders know it will cost 5 to 10x to build an agent versus run one on ServiceNow. How's the government business? It's never been stronger. National governments, regional governments, local governments, they're all expanding their ServiceNow deployments. There are just a few questions that I hope you found useful in answering for you over these few moments we get to spend together. For now, I'll answer the final question. Why will ServiceNow get incremental share of wallet in the enterprise? I'll explain it as plainly as I can. There are many good companies in the enterprise today, and I do have respect for them all. Some that have built very strong businesses over the years, others that are new participants. They're good companies. The established companies aren't going anywhere, and I expect them to do very well based on the years of business logic and context in their platforms. The new companies are growing fast, and they'll be disruptive to some legacy point solutions and likely complementary to the bigger platforms. There are 2 major factors that should cement conviction in ServiceNow. One, if you were to assess all the players out there, which of them include a system of record, deep enterprise context, fully integrated governance and auditability a proven global distribution channel and a flexible pricing model that includes predictable consumption and outcome-based options. I'll save you the trouble. Only ServiceNow's completeness of vision checks all of those boxes. The second factor is pure market fit. Which of the platforms in today's enterprise was designed from the ground up to integrate to all of these players. Again, the only answer is ServiceNow. Risk at scale is why CEOs are losing sleep right now. They read all these threat headlines. They see all these platforms and token invoices, and they don't know what to do. This is the gap. ServiceNow is the bridge. We're in the control business, one platform, one system of action, any cloud, any agent, any workflow, any model, governed, secured and accountable. This is the AI control tower enterprise leaders now know is mission-critical. Enterprise execution with cybersecurity at the core of the platform and cybersecurity growing real fast. ServiceNow is the rules and rails of the enterprise. We're in command of the agenic enterprise from workflow to cyber. Our position is real, it is durable. It is compounding. This is the foundation for a re-rating of ServiceNow. Let's get it started today. We said defining enterprise software company of the 21st century. We are who we said we were. Thank you for your time today, for your interest in ServiceNow and for your enduring support. We'll never take it for granted. With that, I'll hand things over to our President and CFO, Gina Mastantuono. Gina, over to you.

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 9 over $5 million. The combination of Armis and Veza has had a strong pull effect on our core. ITSM was in 15 of our top 20 deals. ITOM 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 EmployeeWorks. And Creator 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 6x year-over-year. Education posted impressive growth, surpassing 125%, followed by telco and media growing 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 8 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 5 or more ServiceNow AI products grew 5.5x year-over-year, which drove a tripling of $1 million-plus deals. In addition, the number of customers with Agentic AI in production has increased 9x over the last 9 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. EmployeeWorks, or 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. RaptorDB 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 Q2, we saw net new ACV outperform, so 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 guide. For 2026, we're 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 a 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.

[Operator Instructions] Your first question comes from Gabriela Borges with Goldman Sachs.

This is for Bill or Amit, if he's on as well. I wanted to ask you about your Level 1 ITSM product cycle. I know you talked about it at Knowledge and when generally available, you have the pilot customers, all that good stuff. My question for you is, what are your reflections over the last 3 months? What's working with that product cycle? What's the feedback in terms of how you can make it better? And Gina, you already gave us a couple of general AI data points on monetization. For this product cycle in particular, any nuggets you can share with us on how much customers increase spending with ServiceNow when they go through the Level 1 automation criteria?

Gabriela, thank you for the question. See, the Level 1 ITSM product cycle has been very accelerated for us. The thing we are solving for, which we talked about at Knowledge, is to really have human equivalent AI specialists, which can take on the full task end-to-end without any customer having to deal with individual pieces of technology, AI agents, the orchestration, the reasoning. We take out and extract out all of that work for them and customers really benefit from the outcome. And that is what's resonating with the customers today. So we have deployed Level 1 support AI specialists as well as 20 other AI specialists inside ServiceNow, and we're starting to do that with our customers. Today, our 40-plus customers are using it already and getting a lot of good benefits. We're talking about closing down close to 80% to 85% of the service requests without having any human interaction. And it's end-to-end service request completion, not just giving you the information, but actioning on those requests as well. And that reduces the time. So for example, some of these requests might take 2 days for humans to get to or resolve, we're doing that in 20 minutes. So the productivity gains for employees is very, very high and very superior because now they're getting the issues resolved, while we're reducing the volume of requests required for humans to deal with, and they can now deal with something more complex instead of having to deal with all these requests which are coming in as volume-wise. So this is a game changer. This is first in the industry, and we've seen huge success already, and you should expect a lot more continuous evolution in this space. Customer traction is excellent so far. Usage goes up considerably because you do burn down a lot of analysis because you are doing full end-to-end task resolution here. And that's really where the opportunity for us exists. And it's also labor arbitrage. So we also get to monetize the labor cost, which the employees have to pay -- employers have to pay the employees. Now they can do this in a much cheaper way so we can take away the labor cost as well. So a lot of great examples happening here and great, great progress so far.

And I'll just add, Gabriela, to the monetization question because it's so very important. I'll reiterate. We crossed $1 billion in AI ACV in the quarter, well on our way to the $1.5 billion. I also noted in my script that we're -- while early, we're already tracking ahead of our target for AI to reach 30% of ACV in 2030. And these L1 autonomous agents, if you think about the complex tasks that they're able to execute, really drives more and more assists. So as we think about compounding effect of consumption, this is a great example of how we will reach our 30% but tracking very well, and we're really excited about what we're seeing.

Your next question comes from the line of Michael Turrin with Wells Fargo Securities.

Gina, on the Q2 upside, you mentioned the Fed outperformance. And I guess the question is that Fed strength, could that at all prove a leading indicator for a bigger bounce back there versus last year in terms of spend? Or how should we think about the seasonality of that segment? And maybe you can also frame just how you're approaching that from a 3Q guidance perspective, if there's any prudence just given the duration or upfront impacts there for us to be thinking about in parsing Q2 and Q3?

Yes. So thanks, Michael, for the question. So clearly, a strong Q2 in Fed is good news in general. And as we move into the big Q3 quarter for Fed, it's definitely a good indicator. We called it out specifically because we did have a little bit more on-prem in Q2, which is purely timing. But I want to be clear that the beat was not all just on-prem. We've had really strong net new ACV in the quarter as well, which allowed us to raise the full year guide. And so Fed business is strong. As we move into Q3, pipe looks good, and we're very excited about what we're seeing.

And Michael, I would just build on what Gina is saying by simply reinforcing the message I gave you on cyber. Cybersecurity is going to be a massive tailwind for ServiceNow. The AI Control Tower for reinventing business is massive. Think about all of the assets, the incidents and the actions that have to take place to manage these large entities of government operations. Think about the Department of Defense even as one example and the importance of saving people's lives like medical material agencies in flight, putting things together, the devices, the coordination. The beauty of ServiceNow as Amit said a moment ago, it doesn't just think but it acts and it closes the loop. And that, I think, is the full cycle of AI innovation and cybersecurity that we're building here at ServiceNow. And as the attack surface becomes even more dangerous by the moment, we're up for the challenge. And I think you're going to see us move up the leaderboard from a #8 company to contending for the top spot.

That's very clear. Congrats on the strong execution there.

Thank you, Michael.

Your next question comes from the line of Alex Zukin with Wolfe Research. Your next question comes from the line of Tal Liani with Bank of America.

I have two questions, but I'm going to combine them into one. Your pricing is token-based, assist-based. And competitors like Salesforce offer outcome-based that could introduce pricing pressure. On the other hand, you own the data, you own the context and competitors need to get the data out, contextualize it and pay a lot for tokens to do that. So my question is, at the end of the day, you're launching many AI modules in the next few quarters or the next few months, do you think on top of the value, can you also offer price advantage versus competition? What happens to pricing of AI given all these differences between you and competitors?

Tal, so we've been very clear in terms of keeping our pricing very customer-friendly and thinking about how they want to adopt our products and where they see value. So we're never trying to kind of do strange things, which is very hard to manage or hard to understand. So hybrid pricing structure, which we introduced where it's a combination of license and usage directly applies to giving the customer predictability and flexibility. And it does -- when you use more, that means you are getting good outcomes. Otherwise, you will not use more. So outcome is already tied in the underlying assumption of usage, right? So trying to kind of define another metric, which is very hard to understand or measure and then have to go back and forth in terms of contracts and everything else in enterprise software doesn't work. And we've seen that for years, and it's played out so well for us now because the way we have addressed our pricing requests from customers seems to resonate with everyone, right? So that's really how we're thinking about it. And the question you asked about tokens and things like that, it's really based on the outcome in terms of what you get the result, the full solution versus just counting each of the individual pieces of LLMs or things like that. So customers are seeing the outcome from the usage, but they're also now being very predictable in terms of what they will pay us. And that has worked quite well. And the second thing you asked about how we allow access to our systems in the context. Our context is for us to really get the better results for our customers. And our competitors don't get access to it, neither do LLMs. So that's really where the secret sauce is, and that's something which -- when we run 7 trillion workflows on our platform, we are collecting so much intelligence, which can really change the game for our customers from the usage perspective and the results perspective. And that's where the differentiation comes in and nobody else has that today.

And I would just add on your question on pricing. Our pricing uplift for our Pro Plus SKUs continues to be above 30%. And for our new AI native SKUs that we just launched, continue those uplifts are in line with what we talked about at FAD, I think 20% to 30%. So customers absolutely understand the value that our AI is delivering to them.

Your next question comes from the line of Samik Chatterjee with JPMorgan.

Maybe if I can follow up on the AI targets here, which you're clearly exceeding already in terms of your road map and tracking ahead. How much of the upside or can you sort of help us ballpark how the adoption is going in terms of new customers coming into the ecosystem as a result versus maybe you're being able to upsell more of your customers into the higher tier packages because of the AI features being more sort of interesting at that level? Like help us -- if you can help us ballpark, break that down a bit in terms of what's the driver of the upside as you look at the road map here?

So thanks so much for the question. As we talked about, the AI native SKUs are really making our agentic solutions more accessible to that customer base, new customers and then existing customers who haven't tried AI before, right? So we talked about deal volume among first-time ServiceNow Agentic AI buyers. So customers that haven't bought AI before grew over 45% year-over-year. And again, uplift in pricing of 20% to 30%. So the AI functionality is really resonating across the board with our customer base, existing customers and then also for new logos. So the new customers are also leaning into AI first as you would expect.

And I'll just add. Also the use cases across the AI is just expanding quite a lot. These customers, of course, started with the GenAI kind of mindset, but now they're doing resolution planning, incident management, triaging, the whole case management around it. So once the agentic use cases get started, we've seen a tremendous amount of interest in doing more and more. And that's why you've seen the growth that Gina was talking about with our AI adoption. And that happens for existing customers because they want to agentify their workflows. They're finding new use cases in other departments. So there's a lot of cross-sell opportunities because you do connect multiple departments and multiple systems together. You're just not doing it for one particular area. And that's where we become much more of a control tower as well as the full orchestration engine versus other vendors out there. So that's really where we're seeing the exciting uptake. And we keep on learning from it. And if you look at the innovation cycle we brought in now, really amount of new capabilities we've been introducing over the last 6 to 12 months is just huge, and it's very exciting for our customers and very differentiated versus all the random individual pieces of technology which are out there in the industry today.

And then on your question specifically on adoption, we talked about number of customers with Agentic AI in production has grown 9x over the last 9 months. So adoption is going well on top of what we just talked about.

Your next question comes from the line of Tyler Radke with Citi.

Certainly, the 200 basis point beat on the cRPO is pretty impressive. We're getting some questions just on some of the mechanics and the full year guidance raise. And I know there's some dynamics you called out in terms of Q2 to Q3 revenue recognition, but it seems like a very strong quarter. You're tracking ahead on AI net new ACV, security business is firing on all cylinders. Just help us understand the relatively modest full year subscription revenue raise versus the Q2 outperformance. Is there more conservatism, other dynamics we should be thinking about?

Yes. So thanks so much for the question, Tyler. So we talked about the fact that about half of the beat is a pull forward of on-prem for a quarter, right? So that won't impact Q3 versus Q2. From a full year revenue guide, we passed along all of the net new ACV overachievement. But yes, I'm always looking, especially in this market environment at a conservative prudent guide, right? There's certainly upside, but we feel really good about the guide right now. And we raised for all of the net new ACV overachievement in the quarter and are being prudent for back half as most would expect.