Seven years ago, on an earnings call, ServiceNow CEO Bill McDermott promised the company would become the defining enterprise software company of the 21st century, according to a transcript published by Benzinga.That promise rested almost entirely on IT ticket routing, the unglamorous software that logs a broken laptop or a locked account. It was a modest foundation for such a large claim.This year tested that promise in a way McDermott could not have foreseen. Enterprise software spent the first half of 2026 gripped by what Fortune called a “SaaSpocalypse,” the fear that AI agents could simply perform the work software licenses used to gate.If an autonomous agent can resolve a support ticket on its own, the logic went, why keep paying per seat for the software that used to route it to a human?ServiceNow absorbed that fear directly. Shares had fallen close to 50% over the prior year heading into the company’s second quarter report. Wall Street was not debating whether ServiceNow made good software. It was debating whether AI made the entire subscription model obsolete.The company reported second-quarter results on July 22, beating estimates on revenue, earnings, and bookings, according to the company’s earnings release.“Q2 was an outstanding quarter that highlights ServiceNow’s broad based demand,” said ServiceNow President and CFO Gina Mastantuono in the release.Subscription revenue rose 24.5% year over year to $3.877 billion, and NOW shares initially fell before recovering after hours as investors digested the numbers.Two days later, Goldman Sachs raised its price target on the stock to $152 from $145 while keeping a buy rating, according to a Goldman Sachs research note shared with TheStreet.That target reboot did not lean on the subscription beat. Goldman analysts led by Gabriela Borges wrote that the single biggest driver of a ServiceNow rerating will be whether the company proves its relevance inside the enterprise AI stack, not whether it keeps beating quarterly guidance. That distinction reframes what investors should actually be tracking.The ServiceNow $1 billion AI milestoneServiceNow’s AI annual contract value crossed $1 billion for the first time this quarter, and Goldman noted the company reiterated confidence in exceeding a $1.5 billion target by the end of 2026.That pace also puts ServiceNow ahead of its own long-term goal of AI reaching 30% of total ACV by 2030.Goldman views that AI revenue as more valuable than a comparable dollar of core workflow revenue, because AI deployments deepen customer entrenchment and create room for future consumption growth.Net new AI bookings grew more than 40% quarter over quarter, and the number of customers running AI in production increased ninefold over nine months. Deal volume among first time AI buyers grew 45% year over year.
Goldman Sachs raised its ServiceNow price target to $152 after AI annual contract value crossed $1 billion in the second quarter.Bloomberg / Getty Images
Automating the IT help deskServiceNow’s Level 1 IT service management product went generally available in May and now resolves 80% to 85% of service requests without human intervention, Goldman’s note revealed.That statistic matters because it is happening inside the same category that built the company’s original business, not a bolted-on side project.More AI:Workers just sent AI companies an ultimatumPalantir CEO has a blunt verdict on OpenAI and AnthropicElon Musk pulls no punches with AI rivals as Grok 4.5 debutsThe bank also flagged a new voice capability, citing one airline customer now routing all customer service calls, roughly 5 million annually, through ServiceNow’s Voice AI.As agents take on more complex tasks, Goldman expects assists and consumption to rise, which is where the actual monetization shows up.The Guggenheim counterpointGuggenheim’s John DiFucci upgraded the stock to buy on July 1 for the opposite reason Goldman is bullish.He expects AI monetization to disappoint and still views AI as a real threat to the software model, according to TIKR. He upgraded purely because the stock had gotten too cheap.Related: ServiceNow’s quiet $1B cybersecurity boomGoldman’s own note lists disintermediation by competing AI technologies as a named downside risk, alongside elongated sales cycles and federal spending delays.McDermott has already previewed his rebuttal to that exact fear. “We don’t need Lamborghinis to deliver the mail,” he told Fortune, arguing most enterprise AI runs on cheaper, purpose-built models rather than the frontier systems that bears worry will replace ServiceNow’s platform.In other words, the same bank raising the target is also naming the scenario in which the thesis fails.Which companies get to keep their multiple?ServiceNow’s stock has now had one violent post-earnings drop and one sharp rally within the same year, evidence that investors have not settled on how to value AI exposure in enterprise software.The company that once described itself as a ticket routing tool is now being priced on whether it becomes infrastructure that AI runs through, rather than a layer AI erases.That question extends well beyond one Santa Clara software company.Every enterprise vendor with a seat-based business model is now being asked to prove the same thing ServiceNow just tried to prove, and the next few quarters of AI ACV disclosures across the sector will show which of them actually can.Related: Bank of America spots ServiceNow’s overlooked AI advantage