ServiceNow Offers a Cheaper AI Bet Than Palantir

Palantir’s second-quarter revenue nearly doubled, yet ServiceNow may still be the more compelling AI stock for investors who care what they pay. The contrast is becoming sharper: one company is selling explosive adoption, while the other is embedding AI inside business processes that already generate recurring software revenue.

ServiceNow reported $3.99 billion of second-quarter revenue, up 24% from a year earlier, while subscription revenue reached $3.88 billion. The company also said AI-related annual contract value surpassed $1 billion, with 123 transactions generating at least $1 million in new annual contract value during the quarter. Its current remaining performance obligations rose 21% to $13.2 billion, offering a sizable backlog of contracted business.

The pitch is less about building another chatbot than controlling what happens after an AI system makes a recommendation. ServiceNow’s AI Control Tower is designed to govern agents, data, security and workflows across different models and cloud environments. Its new Otto platform combines capabilities from Now Assist, Moveworks and AI Experience, aiming to turn disconnected AI tools into actions inside IT, customer service, employee operations and security.

Palantir’s numbers are far more dramatic. Revenue climbed 93% to $1.94 billion, while U.S. commercial revenue surged 149% to $764 million. The company closed 220 deals worth at least $1 million and generated $1.22 billion in adjusted free cash flow, a 63% margin. Management also raised its full-year 2026 revenue outlook to between $8.15 billion and $8.16 billion.

That performance explains the premium. It does not eliminate the risk. Palantir’s valuation leaves little room for a slowdown in commercial growth, while stock-based compensation reached $265 million in the quarter. A few weaker bookings periods could force investors to reconsider how much future expansion is already priced into PLTR.

ServiceNow has its own pressure point. Subscription gross margin fell to 73.5% in the second quarter, partly reflecting the cost of supporting AI workloads and broader platform investment. The company must prove that products such as Otto and Moveworks expand customer spending faster than they dilute profitability.

Still, at roughly 26 times forward earnings versus Palantir’s much richer multiple, NOW offers a more forgiving entry point. Palantir is the purer high-growth AI wager. ServiceNow is the sturdier enterprise compounder, and at this valuation, that distinction matters.