Operator : 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. We will now turn the conference over to Darren Yip, Senior Vice President, Investor Relations and Market Insights. Darren, please go ahead.

Darren Yip : 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 the 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.

William McDermott : 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. I 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 $1 billion or multibillion-dollar businesses, process 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, which ever price per token regime prevails, the enterprise needs one governed layer of record, full 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 study 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 Vesa. Our customers want every AI enterprise to be visible, governed and secured in one command center. Nation 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. Vasa 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 excluding 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 a genic 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 experienced data and decisioning into existing ServiceNow workflows in a 5-year deal and many deals are going longer, you should see that in the CRP or in the RPO, by the way. Maybank, Malaysia's largest bank we'll leverage ServiceNow to establish a resilient operation center to fortified 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 specialists 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 1 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 good 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 goes live with our 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 intelligent 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 NNA CV 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 fail to deliver. ServiceNow will help their sales teams achieve the speed and accuracy to operate at scale. An 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. 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. Employee Works as 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 employee works, 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 enterprises 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, govern enterprise actions headlessly. With so much of a data mess, they wanted to understand ServiceNow's context engine and autonomous data analytics which resolved 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 startups, 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 is ServiceNow AI Control Tower and Microsoft Agent 365, extended agentic AI governance from desktops to data centers with Project Arc and new agents secured by the NVIDIA Open Shell run time 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 seed compression, not at all. Our addressable user base is growing and 50% 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. Our customer is 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 5x to 10x to build an agent versus run one on ServiceNow. Has 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 the 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 two 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, 1 platform, 1 system of action, any cloud, any agent, any workflow any model, govern 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 agentic 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 in the 21st century. We are, who we said we were. Thank you for your time today, for your interest and 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.

Gina Mastantuono : 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 metrics. 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 million over $5 million. The combination of Armis and Vesa has had a strong pull effect on our core. ITSM was in 15 of our top 20 deals. ICON 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 employee works and creative 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 or 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 million-dollar-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 AID of SKUs are driving price uplift in line with the 20% to 30% framework that we laid out at our Financial Analyst Day. Employee Works 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. Raptor DB 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 guidance. For 2026, we are 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 the 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.

Gabriela Borges : 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 went generally available you pilot customers, all that good stuff. My question to you is, what are your options 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 have a couple of general AI data points some monetization. For this product cycle in Brazil, any nuggets you can share with us on how much customers increase spending work ServiceNow when they go through the level automation price.

Amit Zavery : Gabriela, thank you for the question. See the Level 1 ITSM product cycle has been very accelerated for us. The thing we're solving for, which we talked about 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, 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, 40-plus customers are using it already getting a lot of good benefits. We're talking about closing down close to 80% to 85% of the service request without having any human interaction. As this 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 our result. 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. Why 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 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 tax 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 employees have to pay employees have to pay their 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.

Gina Mastantuono : 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 task that they're able to execute really drives more and more assist 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.

Michael Turrin : On the Q2 upside, you mentioned the Fed outperformance. And I guess the question is that strength 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 prudent just given the duration or upfront impacts there for us to be thinking about in parsing Q2 and Q3?

Gina Mastantuono : 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 FAD, 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 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.

William McDermott : And Michael, I would just build on what Gina is saying by simply reinforcing the message I gave you on cyber. Cyber security 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 1 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 is 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.

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

William McDermott : Thanks Michael.

Tal Liani : I have 2 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 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?

Amit Zavery : Yes. Tal. So we've been very clear in terms of keeping our pricing very customer-friendly and thinking about how they want to adapt their 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 would not use more. So outcome is already tied in the underlying assumption of usage, right? So it's 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 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 address 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 individual pieces of LLM or things like that. So customers are seeing the outcome from their usage, but they're also now been 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 can 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.

Gina Mastantuono : 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 schools that were just launched, continue those uplifts are in line with what we talked about at bad at being 20% to 30%. So customers are absolutely understand the value is delivering to them.

Samik Chatterjee : 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 that are 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 people being more sort of interesting at that level? Like help us -- if you can help us break that down a bit in terms of what's the driver of the upside as you look at the road map here?

Gina Mastantuono : So thanks so much for the question. As we talked about, the AI-native SKUs are really making our genetic 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.

Amit Zavery : I'll just add also the use cases across the AI is just expanding quite a lot. -- customers, of course, start with the Gen AI kind of mindset, but now doing resolution manning, incident management, triaging the whole case management around it. So once the agentic use cases get started, we're seeing a tremendous amount of interest in doing more -- and that's why you've seen the growth in is talking about with our AI adoption. And that happens for existing customers because they want to identify 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're 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.

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

Tyler Radke : And 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 then 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?

Gina Mastantuono : 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.

Matthew Hedberg : Bill, obviously, a set of strong results here. And I guess with all the talk about enterprise air readiness and ethos driving increased cyber awareness, it seems to be benefiting you guys. There is a concern from investors that buying cycles may start to elongate I guess with that being said, can you talk about any changes you saw or you might expect on deal cycles or decision-making. Obviously, it seems like ServiceNow is a consolidation point when it comes to IT spending. But just any perspective on that would be helpful.

William McDermott : Thank you for the question, Matt. So think of it this way. The frontier companies out there are incredible. It's so exciting. The hyperscalers are incredible. It's so exciting. And what's really unique is we're in the midst of the AI revolution. So the one has to then say, where is ServiceNow's place in this AI revolution. We're in the bull's eye of it because the frontier models need to get activated in the enterprise. That's battleground. And so whoever teams up with ServiceNow wins. And the reason for that is, as Gina and Amit were discussing the $100 billion workflows and the nearly $8 trillion transactions that we have in flight right now, there's a lot of business processes that are running on the ServiceNow platform. And what we did with the company with the CMDB, you have to go to the beginning of the company. We knew all the people. We know all the places, we know all the things. And over time, we integrated with all the systems of record. So we're completely integrated with everything hyperscalers from tier models, data lakes, systems of record. So that workflow and how you automate that and the incredible power of AI going east to west and north to south without any clue workarounds because these clunky systems that have been in the enterprise for 6 decades doesn't let AI do what AI was born to do. We let AI do what AI is going to do. because of the data in that workflow automation platform. And if it's not in our platform, we've integrated into the other participants, and we have connectors into all of them. So those connections led AI and the magnific and power of AI really go to work. The other thing that is so interesting right now, as you know, the attack surface is exploding -- every ungoverned asset and identity multiplies the blast radius of AI in the enterprise. So we had a leadership position in security and operations, and we integrate with all these excellent security companies that are out there. These guys are my friends. But we did something a little different. We gave the customer that 1 command center where they had a full purview of their landscape, and they had the threat areas very well known. Now with Vesa and Armis, we're managing all the identities of the humans, the agents and the thinking machines are robots. And now we're going after the critical infrastructure the people, the networks and the devices with Armis. So the strategic relevance of ServiceNow is at the bull's eye or the epicenter of the AI revolution in the enterprise. And so -- what you're seeing here is a company before your very eyes turning into both an enterprise software market leader and a cybersecurity market leader and the fastest growing at both. And that's pretty special. And so I think what you should take away from this is Mito was a gift to the ServiceNow company in the sense that everybody now is scrambling with all the exposure that they have to patch things up. But it's one thing to know where the threat area is. It's another thing to hunt it down, take action on it and close the loop is what the ServiceNow platform enables you to do end-to-end cybersecurity. And so I think it's just gotten very interesting right now. It shows in our numbers A lot of people like a seats going away. No, actually, active seats are going up. Well, what about the term of the contracts, they must be going down. No, they're actually elongating and you see that in the CRPO and the RPO. And oh, by the way, the pricing oh, you must be doing something wrong on the pricing. Now actually, we're giving the customer exactly what they want, the hybrid with the seat and the consumption, so they get a great ROI on their investment. So all these pieces are coming together. And then you say to yourself, you read the media headlines today and you're like, wow, it's pretty cool that we have a kill switch for Rogue is for any company that's running ServiceNow and you get a rogue AI, there's a kill switch, it doesn't get through. And then you think about how you use the right model and you hire for the right job. And we do that, too and people are realizing you don't need to take a Ferrari to mail a letter. So using the right technology, the right job and then managing the budgets including all the tokens and the security of this has become pretty important. And so we're right now really seeing a new world order of things. And when one of the colleagues just asked a question, kind of about the AI and all that. I think this maneuver on what we did with the AI control tower and setting that new vision for the company for the future. I think cybersecurity will be bigger than ServiceNow is in the next few years. I think you'll be like -- could you please talk to us about your workflow automation business and your core IT because all I hear you talking about cyber.

Samad Samana : So just wanted to maybe triangulate sales and marketing headcount was up quite a bit quarter-over-quarter and you've already added more sales headcount in that line this year than all of last year. I'm just curious -- is that a matter of timing? Is that some headline coming in from the M&A? Or is that the company ramping up sales distribution ahead of this -- the revised actually impact I'm just trying to understand how we're thinking about sales distribution given the large head one already and how we're thinking about that for the rest of the year?

Gina Mastantuono : Thanks, Samad, for the question. So it's all 3. So a little bit is from M&A as we inherited some incredible sales associates. And as Bill just talked about, security and risk really ramping. So we're certainly making sure that we're hiring ahead of that. We've always said and we've never stopped hiring quota-bearing feet-on-the-street sales exact, and we will continue to do that. And you'll continue to see us do that. So yes, we feel bullish about back half as you would expect, you'll see more sales heads as a result. But yes, some of it is from M&A.

William McDermott : And may I say, Samad, Gina laid it out there beautifully. We're a growth company, and we're going to grow fast. And the one thing I also wanted to reinforce is a commitment that we made as a management team to the capital markets. We will complete this year. After having acquired 3 gorgeous companies, Moveworks, Vesa and Armis, we will complete this cycle of 2026 and start 2027 with the exact same headcount before we did the acquisitions. So you are going to see operating margins and the free cash flow margins of this corporation scale. And you already saw the 3-point operating margin improvement in the quarter, which was way beyond expectations. We are serious about growth, growth on the top line, expanding the margin profile of the company and winning share everywhere we go in this AI revolution, especially cyber.

Brad Zelnick : Gina, I appreciate your gross margin guidance reflects more customers leveraging your hyperscaler partnerships and accelerating customer AI adoption, which both seem like really good things. But focusing on the AI side, -- how are you managing the tension between an increase in consumption mix and better token pricing going forward? And how should we think about the upside versus down risk to gross margin from here?

Gina Mastantuono : Thanks so much for the question, Brad. So yes, both good reasons for a little bit of short-term pressure on margins. Notably, even though we had a little pressure on gross margin, we held the operating margin flat. But with respect to gross margin guidance, as we ramp and the increasing hyperscaler is that we're ramping quicker than planned, which is a very good thing. As we continue to ramp and more and more goes to hyperscalers, the cost per comes down. So we absolutely believe that midterm, there will be less pressure and even better pricing on the hyperscale side of things, which I also talked about at that -- the same thing with respect to AI consumption. And so if you remember at FAD, I talked about a little bit of short-term pressure, but that we absolutely think that mid and longer term, we have some opportunity to continue to increase. All of that being said, operating margins continue to accrete. As Bill said, we will remain as disciplined as ever on driving that only best-in-class top line growth but best-in-class margins well on our way to the rule of 60 by 2030.

Amit Zavery : If I can add, Brad, on the token, how we think about using large language models. I think clearly, in the market, and we've been talking about it for years, so that large language models are getting commoditized. There is no reason for using some of the most expensive ones. So we're very smart about how we use and leverage some of the emerging technologies where use open weight to urgent, where do we have our own, where we have domain specific ones. And where we use this higher-end frontier models. And a lot of these capabilities can keep on being swapped around, and we really optimize across the board to ensure we're getting the best outcome while keeping the costs low. So engineering team is really on top of it, and our research team really does a lot of work in the lab to keep up with it, and we work with many of them as well to optimize how this thing gets adopted. So we are not really worried about the margin impact as we keep on using more of these capabilities. Why because the way we price is really based on the solution versus individual tokens at the end of the day. So I think that should be how you should think about long term.

Keith Bachman : Bill, I wanted to direct this to you, if I could. You've talked quite a bit tonight about cyber and high aspirations for what you want to be as a cyber company. But maybe you could talk a little bit about revisit your strategy and aspirations as what the boundaries are. So you have Vesa and Armis, which are intriguing assets, but there's a lot of areas where you don't play or don't participate. You've been in the stock for a while in terms of a workflow engine. But how do you think about your future opportunities with cyber. And related to that is there's ongoing convergence in cyber and observability with new competitors ending it from the cyber side -- you've had some presence in observability, but as these markets converge between workflow, cyber and observability, how do you think about revisiting your strategy also on the observability side?

William McDermott : Yes. No, no, I appreciate it. Thank you very much, Keith. We're building the world's most integrated end-to-end security platform. I think that's the way you should think about it. And think about us in the context of AI control tower, Think about us as the Agentic front door to Security 360. And of course, Armis give us an enormous start on some of the areas we didn't have, but we already had a lot of areas and a very large security business. Now with the great engineering we have and the development commitment we have I think we're just going to build so many great things. I talked about risk and compliance, which we already have. I talked about identity and access security, which we already have. I talked about cyber physical security, which we already have. I talked about continuous vulnerability detection which arms is the best at, and we're literally hunting the vulnerabilities, not passively looking at them on a dashboard exposure management, agentic incident response. These are things that our platform does -- so what I laid out today was an organic story. Now to the extent there might be other things we wish to do. I'll let Amit comment on some of the road mapping that we're doing. But I just want to give you great confidence that like what we have right now is awesome. And it's going to really rock the world. In fact, I'm actually pumped up because we just had a couple of days of Board meetings and I got to see the solution, the products that we have in flight and our great go-to-market leader Paul and all the work he's doing with the teams and how beautifully integrated they are in the company. Where the rare company that actually brings companies in from the outside and puts their CEOs in charge of the business. And we did that with employee works with Moveworks, -- and now we did that with Armis and Gavin running our security business as a corporation within the corporation, and that's inclusive of Vesaasa. And so the alignment of our naturally born assets and then having these businesses run by people that are born in the security space. I mean, you've got to look at this hunger this drive, this belief this innovation road map, the way I saw it, and I think you would be as excited as I am. So Amit, do you want to add some color.

Amit Zavery : Yes. No, Bill, I think you covered a lot of the ground in there. I think, Keith, on in general, if you look at the security and the cybersecurity space, we are basically covering the pre-breach with vulnerability management and exposure management. So we complete that story in terms of any device, any asset, any kind of agents and everything else across Versand Arm is from that perspective. Then you have the post breach, which we have been very strong at ServiceNow. We're managing all of the things for -- so across the life cycle or any breaches associated with cyber attack. And now we have a runtime security as well. So we're bringing all of these pieces into 1 platform. And really, that's the area we are playing in. There are always going to be a lot of other peripheral things in cybersecurity. And the cybersecurity space is usual, we're not going to be in every area. But where we have strength, where we have opportunity and it builds on top of what we did with CMDB, what we did with approach breach stuff and now adding the asset as well as the pre-breach things for any kind of exposure and vulnerability for devices and IT is just really changes the game and creates a big platform. A second thing quickly on observability. As you probably saw, we launched our AI ops specialist as part of -- so we're already doing a lot of work with absorbability, bringing agent kind of use cases into a platform. So we're not trying to build this observably outside. It's really part of ITOM and then we're integrating with all the other players, which gives us signals and then you can make decisions and take actions. And that's really the foundation around ITOM and everything else we do in that ecosystem today.

William McDermott : And if I could, I just want to say, Keith, to my friends out there in the security business, great friends like Nikesh and George and many others. They still are great friends, and they are great partners. And we do -- we run their solutions in our company, too. And we intend to continue to partner with them and make those partnerships even deeper because it's such a surface area and so much opportunity and meet those as open up the floodgates. So I think the new information from a shareholder value standpoint is we're in the party now. And we're not out to replace all of those excellent companies, we're building our own story on our own great foundation, and it's important that the customer gets the benefit of all of us because they're going to need it.

Gregg Moskowitz : Bill, maybe a follow-up to an earlier question, if I may. All the commentary on this call sound very favorable, but there have been a couple of recent indications from tech vendors at organizations have become more consumed with hardware and AI spending, and this is having a knock-on effect on other aspects of IT spend. So just to ask this directly, have you seen any impact to sales cycles with ServiceNow?

William McDermott : I have not. In fact, the key here, Greg, is this has really become a C-suite story. You have to recognize that breadth and depth of our portfolio, having 6 unicorn businesses, a seventh on the way, by the way. So when we go in to 2027, I'll have 7 unicorn businesses that are either $1 billion or multiple billions. Keep that in mind. So the breadth and the depth covers the surface area of many aspects of a corporation, but it also covers the most important part of the corporation, which is how do you run the business? And the fact is, with AI, these customers don't have enough time to do it the old way. So many of them have such a fragmented enterprise that they need to take advantage of our workflow automation above the mess and click in that AI engine into this unlivable platform and really begin running. So the higher you go in the C-suite, the more relevant we are and the more the C-suite realizes that we're in the bulls eye of what has to happen to fundamentally be the control tower for reinventing these businesses. So I have not seen any change, if I've seen any changes on the positive. And I will tell you, we're ready. And our business is rocking. And when I think about what we're going to do with the new businesses that we took advantage of at the end of last year and took some criticism for. It was because we believe in our strategy, we believe in our team, we believe in our customers and what they need and now it's all about execution, and we're good at that. So what I see is a customer base waiting for us, plays that we're running to gain even more traction and a fantastic future for people who believe in ServiceNow.

Adam Wood : First squeezing you mentioned in the state call around the AI control tower and controlling the enterprise control pain for customers. Obviously, that's a huge opportunity and a critical function. But obviously, also a very competitive space -- could you talk a little bit about your right to win there? Is this going to be more a departmental battle where you have the strongest presence in wind or do the enterprise wide? And then can you talk about any customers that are going out in that review and kind of call out why they're charging you for that use case.

Amit Zavery : Yes. Maybe, Adam, I'll start to tell you about how we think about AI control tower. As Bill mentioned, our heritage has been the CMDB platform. which tracks every kind of asset out there, hardware, software and other enterprises have. We build a control tower with that kind of foundation where we would be able to discover anything an enterprise is running which includes now AI agents, any devices which are connected to it. And it's a very heterogeneous. This work across multiple domains. It's not really for ServiceNow assets, but everything else. So we've always been doing this open ecosystem discovery management, life cycle tracking, cost management and observability around it. So it was very natural for us to get into this idea of AI. -- agents being also monitored and managed across all the different landscape customers have. And that has been very clearly resonating with the customers. We have more than 500-plus customers already like using a control now in the first 6 months when we launched this product, and it continues to grow. And we keep on adding more and more capabilities in terms of finding like Bill mentioned, kill switch, right? How do you find errors or issues with any of the reagents running around and stop them from accessing any information or any data. With Vesa, we added a lot more around identity governance -- and with the Armis is be able to now take all the devices as well in their physical AI as well. So the breadth and the depth we have here is the reason why we have the right to win. We had the foundation and we build a solid product, which is really working for our customers, and we have tremendous amount of proof points where we are able to now really help customers to manage the whole huge AI landscape and really have control and a peace of mind and that's really where the foundation is from.

William McDermott : And I would say, running the business is what C-suite executives care about. How am I going to be a best run business. And when you think about it that way, and you asked for some examples also order to cash, procure to pay, designed to build, hire to retire. We can go through all the business processes and CEOs know exactly what they are for their company. And they know they have to optimize them to ring margin length out of waste and gain future market opportunities like lead to cash as an example. So they're thinking big picture, they're thinking business processes. So in that context, our enterprise participants in the transformation of these companies. And some examples would include a Fortune 50 health care, care and retail distributor. You know this company well, believe me, they're capturing millions in annualized savings by consolidating vendor risk governance and fraud detection across 1,000 suppliers. They're using ServiceNow's AI control tower. Tech Mahindra. You recognize that pretty quickly, strengthening through a 5-year deal, by the way, to fundamentally transform the workflow processes across HR, IT, security and they're going to govern their assets at mass scale with a genetic AI. Another one I love is Maybank. By the way, another 5-year deal, so much for deal shortening, right, a leading financial institution and what they're doing, I mean, this is Malaysia's largest bank, they're using the AI platform and control tower to establish a resilient operation center to fortify security and resilience as well as autonomous regional operations. NTT Data is one of my favorites too, since Paul and I were very involved in that, I'll tell you. They have a governance process with us to drive AI scale for all internal use globally, and they're doing it on a single platform. and they're looking at responsible innovation done with great visibility and the control tower accelerating AI adoption, but also monitoring it, measuring it, make sure everything is done in real time the right way. And Amit about Kill Switch, we're doing many other things. So I hope that gives you a little feel for it, Adam.

Darren Yip : Thank you all for joining. We look forward to talking to you next quarter.

Operator : Ladies and gentlemen, this does conclude today's conference call. Thank you all for your participation, and you may now disconnect.