ServiceNow’s AI division has stopped being a proof-of-concept and started being a revenue machine. The research house M+ Online noted that NOW’s AI business surpassed USD1bn in annual contract value during the second quarter of fiscal 2026, marking a watershed moment for the software vendor’s pivot toward artificial intelligence monetisation. This is not theoretical upside—it reflects actual enterprise adoption translating into commercial demand across NOW’s global customer base.
What ServiceNow Does and Why AI Matters
ServiceNow operates a cloud-based software platform serving enterprise IT, HR, customer service, and security workflows across large organisations. The company’s core proposition is workflow automation and data integration—precisely the infrastructure needed to embed AI agents and autonomous systems into mission-critical processes.
Beyond core subscription revenue, NOW has aggressively expanded into security through the integration of Armis and Veza, creating what the research house calls an Autonomous Security offering spanning asset visibility, identity governance, and exposure management. This diversification matters because it broadens the addressable market and creates additional cross-selling hooks across NOW’s enterprise customer base, reducing reliance on any single product line.
The Financial Picture: Revenue Growth and Order Book Strength
Subscription revenue climbed 23% year-on-year in constant currency to USD3.88 billion in 2QFY26, according to Malacca Securities Research, signalling sustained demand momentum despite macroeconomic uncertainty. More importantly, current remaining performance obligations (RPO)—the contracted revenue NOW will recognise in future periods—jumped 21.5% YoY to USD13.2bn.
Total RPO reached USD29.0 billion, equivalent to around 2.1 times FY25 revenue, as noted in the research house’s analysis. This figure matters because it provides visibility into forward revenue recognition and reduces the risk of surprise misses or sudden slowdowns—NOW’s pipeline is essentially locked in contractually. The security integration and AI monetisation are incrementally fattening these contract values.
Technical Setup and Valuation Thesis
From a charting perspective, Malacca Securities identified a bullish continuation pattern in NOW’s price action. The stock has broken above its 200-day moving average and is printing higher lows and higher highs, currently well-supported by the 20-day EMA. The research house projects the next resistance targets at 162.5 and 192.4, while the support zone sits at 130.9 to 135.2.
A breakdown below the support zone would invalidate the bullish setup, M+ Online’s research team cautioned, signalling that disciplined stop-loss placement matters for swing traders and position traders alike. The technical foundation supports the fundamental thesis: AI adoption is broadening, order books are deepening, and security is emerging as a new growth pillar with meaningful cross-sell potential.
What This Means for Retail Investors
ServiceNow is not a speculative AI play—it is a large-cap software vendor (now a legitimate infrastructure bet on the enterprise AI supercycle) with contracted revenue visibility and a real, growing AI revenue stream.
For retail investors, the key question is whether NOW’s valuation reflects this transition from software-as-a-service vendor to AI-native platform. According to Malacca Securities Research, the strong RPO growth (21.5% YoY) and AI ACV milestone (USD1bn) suggest the market may still be underpricing the incremental earnings accretion from security and AI. However, execution risk remains—the company must continue converting AI pilots into long-term contracts and successfully integrate Armis and Veza into seamless cross-selling motion.
Macro headwinds could also pressure valuations: technology multiple compression, enterprise IT budget cuts, or competition from OpenAI and other AI infrastructure players could throttle growth. The research house’s bullish technical stance does not eliminate fundamental uncertainty, and retail investors should factor in their own risk tolerance and time horizon before making a decision.
Key Takeaways
- AI revenue is now real. USD1bn in AI ACV in 2QFY26 means ServiceNow’s AI business is no longer a moonshot—it is a material, growing segment of the company’s revenue stream.
- Order book provides a runway. USD29bn total RPO (2.1x FY25 revenue) gives NOW strong visibility into future earnings and reduces near-term revenue surprise risk.
- Security expansion broadens the moat. Armis and Veza integration opens new addressable markets while enabling cross-sell leverage across existing customers.
- Technical setup is constructive. According to Malacca Securities, the breakout above MA200 and bullish continuation pattern suggest upside toward 162.5 and 192.4, with support at 130.9–135.2.
- Execution is the risk. AI adoption must sustain, security integration must succeed, and enterprise budgets must hold—no guarantee in a volatile macroeconomic environment.
Full Report: The complete Malacca Securities research report on ServiceNow Inc is available on M+ Online. Published 22 September 2026.
Source & Attribution
This article summarises a research report published by Malacca Securities Sdn Bhd (M+ Online) on 22 September 2026. All ratings, target prices and forecasts belong to Malacca Securities Research, not to the author of this blog.
Read the original report: M+ Online Research Report | View full PDF
Disclaimer: This article is for informational and educational purposes only and does not constitute financial advice or a recommendation to buy or sell any security. Ratings and target prices cited are those of Malacca Securities Research and are subject to change. Always do your own research before making investment decisions.
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