ServiceNow may see a performance lift later this year as customers that tested its artificial intelligence features buy more usage credits and large contracts signed during the pandemic come up for renewal. Analysts say the timing could drive stronger expansion rates if budgets hold and early results with AI tools translate into broader deployments across IT, HR, and customer service workflows.
The discussion centers on two near-term levers. First, consumption of AI features that run on a credit model. Second, a wave of 2020–2021 enterprise agreements returning to the table. Both could influence revenue growth and net retention in the back half of the year.
Background: A Platform Built for Workflows
ServiceNow sells subscriptions for digital workflows that automate tasks across large organizations. In recent years, the company added generative AI features to speed ticket resolution, summarize incidents, and suggest actions. Many of those tools are metered with credits, which customers purchase in blocks and draw down as usage rises.
During the pandemic, many enterprises accelerated purchases to support remote work and service reliability. Deals often bundled multiple products and featured multi-year terms. Those contracts are now cycling into renewal windows, giving vendors a chance to expand seat counts, add modules, or convert pilots into standard features tied to broader adoption.
AI Credits Could Lift Expansion
Early adopters trialed ServiceNow’s AI this year, often in targeted teams. If those pilots show value—faster resolution times, fewer manual steps—companies tend to extend usage to more groups. That shift requires additional credits. Analysts expect that motion to emerge as a second-half driver, complementing core subscription growth.
“Analysts think ServiceNow can improve performance later this year as early AI adopters stock up on more credits and as some pandemic-era contracts come up for renewal.”
Credit-based monetization also helps align pricing with outcomes. When tickets, cases, or changes are processed with AI, usage rises, and so does consumption. That dynamic can produce variable upside when projects move from testing to production.
Renewals From the Pandemic Cohort
Expiring deals signed under emergency conditions are resurfacing in a more normal IT planning cycle. This creates both risk and opportunity. Some customers may seek pricing relief after years of cost control. Others may consolidate tools and standardize on a smaller set of platforms, favoring vendors that can show clear return on investment and faster time to value.
For ServiceNow, the best-case outcome pairs base subscription renewals with targeted add-ons. Those include AI credits, process mining, and industry solutions. Sales teams often use renewals to align products with current governance needs, security standards, and measurable service-level goals.
Budget, Competition, and Execution Risks
Macro uncertainty still shapes enterprise spending. CFOs are selective, even when they support automation. Pricing scrutiny has increased, and purchasing committees demand proof points from pilots. Competitors such as Salesforce, Microsoft, and Atlassian press similar AI narratives, putting pressure on differentiation and total cost of ownership.
Execution will matter. Clear packaging of AI features, transparent credit consumption, and clean integrations with existing ServiceNow modules can speed decisions. Customer references showing reduced mean time to resolve incidents or lower service desk volumes help justify expansion.
Signals to Watch in the Second Half
- Growth in paid AI credit consumption as pilots scale to production.
- Renewal rates and net retention for 2020–2021 cohorts.
- Attach rates for AI features in core IT service and operations products.
- Customer case studies quantifying productivity and cost savings.
- Competitive displacement or standardization wins in large enterprises.
Outlook and Industry Impact
If AI credits ramp as expected, ServiceNow could see mix shift benefits and a stronger expansion motion at renewal. That would reinforce the platform model, where incremental features add measurable value to existing workflows. It could also influence pricing norms as more software vendors adopt consumption for AI-heavy tasks.
For buyers, the message is practical. Start with narrow use cases, capture results, then scale where the data supports it. For investors and operators, the second half will test whether early AI enthusiasm translates into durable spend.
The coming renewal season and credit purchases will offer a clear read. Strong attach rates and stable budgets would point to steady improvement. Weaker uptake would signal longer evaluation cycles. Either way, the next two quarters will show how far AI has moved from pilot to practice inside large enterprises.
