Enterprise

ServiceNow's AI bookings cross $1 billion as SAP and IBM split the Q2 enterprise verdict

Q2 2026 earnings from ServiceNow, SAP, and IBM landed a divided verdict on whether AI is destroying or reinventing enterprise software demand.

By Asher Glick · Enterprise software desk · 2026-07-28 · 4 min read

Photo: Unsplash / Sean Pollock — Corporate office towers viewed from below, symbolizing enterprise software buyers

ServiceNow crossed $1 billion in annual contract value for its AI business in Q2 2026, a milestone disclosed in its July 22 earnings release that arrived in the same fortnight IBM shares fell 25% on July 14 and Pegasystems dropped more than 16% on July 22. The three prints, alongside SAP’s, delivered a split verdict on the so-called SaaSpocalypse: AI isn’t uniformly destroying enterprise software demand, but it’s sorting the incumbents into winners and hostages.

ServiceNow’s numbers under Bill McDermott make the bull case concrete. Subscription revenues hit $3.877 billion, up 24.5% year over year; total revenues reached $3.987 billion; remaining performance obligations stand at $29 billion. Agentic deployments increased ninefold in nine months, and the share of renewal customers buying agentic AI for the first time doubled both sequentially and year over year. A renewal rate of 98% rounds out the picture.

SAP’s Christian Klein delivered a parallel story in a different accent. Current cloud backlog reached €22.9 billion, up 26% at constant currencies, with SaaS and PaaS revenue of €6.2 billion. AI and SAP Business Data Cloud featured in more than 90% of the company’s 50 largest deals. CFO Dominik Asam offered the composure line of the quarter: “the underlying trajectory of our business remains fully intact.”

IBM told the opposite story in the same vocabulary. Software growth decelerated to 5%, down from a Q4 2025 peak of 14%, even as Data grew 19% and Hybrid Cloud grew 11%. CFO Jim Kavanaugh told CIO that some customers were redirecting spend toward servers, storage and memory to secure AI infrastructure, delaying enterprise license agreements. The market read that as the mainframe-anchored bundle losing the budget fight to GPUs.

Gartner’s George Brocklehurst framed the pivot: “the decisive measure is no longer how many people log into software; it is how much governed work the software completes.” He argued the SaaSpocalypse begins when enterprises stop paying for access and start paying for execution.

That framing sharpens the ServiceNow adjacency play, too: a $7.75 billion Armis acquisition closed in April, a roughly $1 billion Veza deal, and a security and risk unit that has crossed a billion dollars in its own right, described by The Street as the fastest-growing among the top ten enterprise cybersecurity companies.

Skeptics aren’t buying the full narrative. “strong backlog proves commitment rather than fresh demand, and a 98% renewal rate does not reveal what was conceded to win it,” analyst Sid Gogia noted. In an execution economy, the concessions are the story nobody prints.

Sources