ServiceNow (NYSE: NOW) has become a focal point of the debate over whether enterprise software stocks have been unfairly discounted amid concerns about artificial intelligence disruption. A market commentary argues that the shares remain nearly 50% below their previous all-time high and suggests that the stock could eventually return to substantially higher levels. While such forecasts are speculative, ServiceNow’s underlying financial results show that the company continues to generate strong growth while rapidly integrating AI into its enterprise platform.

Revenue Growth Remains Above 20%

ServiceNow’s latest results provide a stronger foundation for the bullish argument than the stock chart alone. In the second quarter of 2026, the company generated $3.99 billion in total revenue, representing 24% year-over-year growth. Subscription revenue, the company’s primary revenue source, reached $3.88 billion, increasing 24.5% from the same period a year earlier. Both measures exceeded the company’s guidance range.

The company also ended the quarter with $13.2 billion in current remaining performance obligations, up 21% year over year, while total remaining performance obligations reached $29 billion. These contracted commitments provide visibility into future revenue and are particularly important in an environment where investors have become more concerned about whether AI could undermine traditional software business models.

The revenue trajectory is also visible over the longer term. The accompanying chart shows annual revenue increasing from approximately $1.9 billion in 2017 to roughly $14.7 billion on a trailing basis, illustrating the scale of ServiceNow’s expansion. The chart itself is supplied market material rather than company guidance, so its valuation and future-price implications should be treated accordingly.

AI Is Becoming a Measurable Commercial Business

The most important development for the ServiceNow thesis is that artificial intelligence is beginning to generate measurable contract value. ServiceNow reported that ServiceNow AI crossed $1 billion in annual contract value during the second quarter. The company also said agentic deployments increased ninefold in nine months, suggesting that customers are moving beyond experimentation toward broader enterprise implementation.

That matters because the principal concern surrounding software stocks has shifted from whether AI will be adopted to whether AI agents will replace existing software spending. ServiceNow’s strategy is to position its platform as an infrastructure and governance layer through which enterprises deploy and manage AI-driven workflows. The company’s launch of ServiceNow Otto, which combines Now Assist, Moveworks and AI Experience, is part of that broader strategy.

For investors in Israel and globally, the distinction is significant. If AI becomes an additional layer of enterprise spending rather than a substitute for software subscriptions, companies such as ServiceNow could potentially expand their addressable market. If AI instead compresses the value of traditional software licenses, the long-term economics would be more complicated.

The Valuation Reset Is Only Part of the Story

ServiceNow’s shares have suffered a substantial decline from their previous highs, reflecting broader concerns about software valuations, AI competition and the capital being redirected toward newer AI platforms. MarketWatch reported that the stock remained about 39% below its 52-week high as of August 4, while recent trading showed renewed strength following the company’s earnings report.

Yet the company’s fundamentals remain comparatively strong. ServiceNow raised its full-year 2026 subscription-revenue guidance to $15.76 billion to $15.78 billion, representing 22.5% reported growth. Management also forecasts a 31.5% non-GAAP operating margin and a 35% free-cash-flow margin for the full year.

The next phase of the ServiceNow story will therefore depend on whether the valuation reset is accompanied by a deterioration in fundamentals or merely reflects a change in how investors value high-growth software. The market will be watching subscription growth, AI annual contract value, remaining performance obligations, operating leverage and free cash flow. A sustained recovery would require evidence that AI is accelerating ServiceNow’s economics rather than simply changing its product strategy. For sophisticated investors, that distinction is likely to matter more than any specific price target.