ServiceNow's latest earnings show why it paid $7.75 billion for Armis
Management devoted much of its quarterly update to explaining how the Israeli cybersecurity company fits into its strategy to become the enterprise AI control layer.
Three months after completing its $7.75 billion acquisition of Israeli cybersecurity company Armis, ServiceNow used its quarterly earnings to make clear that the deal is no longer just an expansion into security, it is becoming one of the central pillars of the company's artificial intelligence strategy.
The enterprise software company on Wednesday beat Wall Street expectations for the second quarter and raised its annual subscription revenue forecast for the second time this year, easing concerns that AI is undermining traditional software vendors. But the strongest strategic message from management was not about financial results. Instead, CEO Bill McDermott repeatedly returned to Armis as he laid out a vision of ServiceNow becoming the control layer for enterprise AI.
The company reported second-quarter subscription revenue of $3.88 billion, ahead of analysts' expectations of $3.82 billion, while adjusted earnings per share of 90 cents also exceeded forecasts. It now expects 2026 subscription revenue of $15.76 billion to $15.78 billion, up from its previous outlook. Shares rose nearly 4% in after-hours trading, although the stock remains down about 38% this year.
For much of the earnings call, however, McDermott focused less on financial performance than on what he described as an exploding security challenge created by AI.
"We already were a $1 billion-plus cybersecurity business," he said. "Today, our risk and security business is the fastest growing of the top 10 cyber companies in the enterprise."
The acquisition of Armis featured prominently throughout that argument.
McDermott described cybersecurity as one of the company's primary growth engines, alongside workflow automation and AI orchestration, arguing that enterprises increasingly need a single platform capable of governing AI models, digital identities and connected devices simultaneously.
"AI Control Tower plus Armis plus Veza," he said, outlining the architecture behind the company's security strategy. "Our customers want every AI in the enterprise to be visible, governed and secured in one command center."
He argued that AI is rapidly expanding the enterprise attack surface.
"There are 2.2 billion agents entering the enterprise globally. That's 2.2 billion new identities," McDermott said. "We'll have 40 billion connected devices in the world in the next four years. Armis already tracks 7 billion of those devices in real time."
According to McDermott, combining Armis' device visibility with ServiceNow's workflow platform and identity capabilities gives customers a unified system for detecting threats and responding to them.
"The attack surface is exploding," he said. "Every ungoverned asset and identity multiplies the blast radius."
The CEO also revealed that Armis is already being deployed in government projects. He cited one U.S. federal agency that is using Armis to move "from asset-blind incident response to comprehensive threat hunting," while noting that public-sector organizations increasingly seek out the platform because government policies require detailed visibility into connected assets.
The emphasis on Armis marks a notable shift in how ServiceNow is presenting itself to investors. Historically viewed primarily as an enterprise workflow software provider, the company is increasingly positioning cybersecurity as a core business rather than an adjacent product category.
McDermott argued that ServiceNow now operates "the eighth largest cybersecurity business in the enterprise," adding that it is growing faster than larger competitors.
Beyond cybersecurity, management sought to reassure investors that demand for enterprise AI remains strong despite growing fears of a broader "SaaSpocalypse" as generative AI reshapes the software industry.
ServiceNow said its AI business surpassed $1 billion in annual contract value, keeping it on track to exceed its target of $1.5 billion by the end of next year.
The company also said adoption of its agentic AI products continues to accelerate. McDermott noted that the number of customers running AI agents in production has increased ninefold over the past nine months, while the proportion of renewal customers purchasing agentic AI for the first time doubled both sequentially and from a year earlier.
Rather than seeing AI reduce demand for enterprise software, ServiceNow argues it is becoming the coordination layer that allows organizations to deploy AI safely across large businesses.
"The path to value isn't just making AI," McDermott said. "It's deploying AI securely across the enterprise."
