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    NOW
    Earnings call· Sep 2025(Q3 FY25)

    ServiceNow, Inc. NOW

    Oct 29, 2025 Source

    Executive summary

    ServiceNow Q3 FY25 — AI Product Momentum Drives Strong Outperformance

    ServiceNow delivered exceptional Q3 FY25 results, significantly exceeding top-line and profitability guidance, driven by broad-based demand and strong execution. The company is capitalizing on the enterprise AI opportunity, with its AI products tracking ahead of plan and demonstrating rapid adoption. Management raised full-year guidance, reflecting confidence in continued growth and AI-driven operational efficiencies, despite potential Q4 federal government deal timing impacts.

    Highlights

    5

    • Subscription revenue growth was 20.5% year-over-year in constant currency, 100 basis points above the high end of guidance.

    • Current RPO growth was 20.5% year-over-year in constant currency, 250 basis points above guidance.

    • Non-GAAP operating margin was 33.5%, 300 basis points above guidance.

    • The company closed 103 deals greater than $1 million in net new ACV, including 6 over $10 million and 3 over $20 million.

    • AI products are on pace to exceed $0.5 billion in ACV this year, with 12 Now Assist deals over $1 million and AI Agent Assist consumption increasing over 55x since May.

    Concerns

    1

    • Potential impact of ongoing government shutdown on Q4 deal timing in U.S. federal business, prudently factored into guidance.

    Guidance & targets

    11
    CategoryTargetConfidence
    Full-year 2025 Subscription Revenues
    $12.835 billion to $12.845 billion
    high materiality
    High
    Full-year 2025 Subscription Revenues YoY Growth
    20.5% year-over-year growth or 20% on a constant currency basis
    high materiality
    High
    Full-year 2025 Operating Margin
    31%
    high materiality
    High
    Full-year 2025 Free Cash Flow Margin
    34%
    high materiality
    High
    Full-year 2025 Subscription Gross Margin
    83.5%
    medium materiality
    High
    Full-year 2025 GAAP Diluted Weighted Average Outstanding Shares
    210 million
    low materiality
    High
    Q4 2025 Subscription Revenues
    $3.42 billion and $3.43 billion
    high materiality
    Medium
    Q4 2025 Subscription Revenues YoY Growth
    19.5% year-over-year growth or 17.5% to 18% on a constant currency basis
    high materiality
    Medium
    Q4 2025 cRPO YoY Growth
    23% or 19% on a constant currency basis
    high materiality
    Medium
    Q4 2025 Operating Margin
    30%
    high materiality
    Medium
    Q4 2025 GAAP Diluted Weighted Average Outstanding Shares
    210 million
    low materiality
    High

    Segment performance

    8
    SegmentRevenueYoYQoQMargin
    Technology Workflows
    Includes ITSM, ITOM, ITAM. ITSM and HR+ net new ACV doubled QoQ. ITOM+ net new ACV surged more than 5x QoQ.
    50 deals over $1 million6 deals over $5 million
    		————
    Security and Risk
    Fifth business to cross $1 billion ACV threshold.
    12 of top 20 deals3 deals over $1 million
    		$1 billion———
    CRM and Industry Workflows
    CSM+ deal volume tripled YoY. AI-powered CPQ solution is a powerful entry point into front office transformation, seeing displacement wins and multiple million-dollar deals.
    14 of top 20 deals15 deals over $1 million
    		————
    Core Business Workflows
    13 of top 20 deals14 deals over $1 million
    		————
    U.S. Federal Business
    Surpassed net new ACV expectations for the quarter. Now Assist pilots quickly converting into deals. GSA OneGov agreement positions well for broader adoption.
    		—over 30%——
    Transportation and Logistics
    Led the way in net new ACV growth.
    		—over 90%——
    Retail and Hospitality
    Saw momentum in net new ACV growth.
    		—over 50%——
    Education
    Saw momentum in net new ACV growth.
    		—over 50%——

    Operational metrics

    15
    Non-GAAP operating margin
    33.5%300 basis points above guidance
    Q3 FY25

    Driven by top line outperformance, AI OpEx efficiencies, disciplined spend management and timing of some program spend.

    Free cash flow margin
    17.5%up 50 basis points year-over-year
    Q3 FY25
    Renewal rate
    97%
    Q3 FY25
    Customers with >$5M ACV
    553
    Q3 FY25
    Deals >$1M Net New ACV
    103
    Q3 FY25
    Top 20 Deals Product Inclusion
    6 or more products
    Q3 FY25

    The power of our Better Together platform model was evident as all of our top 20 deals included 6 or more products.

    Now Assist Deals >$1M Net New ACV
    12
    Q3 FY25
    AI Control Tower Deal Volume Growth
    more than quadrupledquarter-over-quarter
    Q3 FY25
    AI Agent Assist Consumption Increase
    over 55x
    since May

    Just since the end of May, AI Agent Assist consumption has increased over 55x.

    AI Products ACV Pace
    exceed $0.5 billion
    FY25

    Our AI products are on pace to exceed $0.5 billion in ACV this year, excellent progress toward beating at $1 billion target next year, and we're totally focused on surpassing it.

    Share Repurchase Amount
    644,000 sharesup nearly 70% versus last quarter
    Q3 FY25
    Share Repurchase Authorization Remaining
    $2 billion
    as of Q3 FY25 end
    Now Assist Price Uplift
    over 30%
    Q3 FY25

    We continue to see price uplift for Now Assist of over 30%, which is powerful.

    Internal IT, Customer Service, HR Processes by Agents
    90%
    current

    90% of the IT, customer service and HR processes are now being done by agents.

    AI Control Tower Customer Base Growth
    4x
    Q3 FY25

    Customer base grew by 4x in this quarter itself.

    Industry KPIs

    11
    MetricValueDetails
    Revenue growth$3.299 billionUSD
    Arr net new arr$0.5 billionUSD
    Rpo current rpo$24.3 billion (RPO), $11.35 billion (cRPO)USD
    Bookings billings103 dealsdeals
    Pricing model mixhybrid model
    Customer account count553customers
    Large deal new logo metrics103 dealsdeals
    Gross retention renewal rate97%%
    Multi product platform attach6 or more productsproducts
    Operating FCF margin rule of 4033.5% (operating margin), 17.5% (FCF margin)%
    Ai product adoption monetization12 dealsdeals

    Orderbook & backlog

    2
    Remaining Performance Obligations (RPO)$24.3 billionQ3 FY25 end

    23% year-over-year constant currency growth

    Current Remaining Performance Obligations (cRPO)$11.35 billionQ3 FY25 end

    20.5% year-over-year constant currency growth

    250 basis point beat versus guidance

    Product announcements

    3
    ProductTypeDetails
    Zurich Releaseupdate
    Figma and ServiceNow Integrationroadmap
    Genesys and ServiceNow Unified Experienceroadmap

    Deals & partnerships

    1
    MoveWorksAcquisition to accelerate AI roadmap

    Brings a lot of good AI expertise and talent to allow us to accelerate our road map.

    Risks & headwinds

    1
    Potential impact of ongoing government shutdown on Q4 deal timing in U.S. federal businessQ4 FY25

    prudently factored in this timing dynamic into our guidance

    Mitigation: Demand is strong, and we are resonating so clearly with the federal agencies. We have factored in a bit more prudence into this guide because procurement processes do take a bit of time.

    What to watch in Q4 FY25

    5

    Federal Government Deal Timing

    Q4 FY25
    CurrentOngoing government shutdown impacting deal timing
    TargetResolution of government shutdown and deal closures

    Why it matters

    The federal business had strong Q3 performance, but Q4 guidance prudently factors in potential delays due to the shutdown, which could impact revenue and cRPO.

    For Q4, I would note that while our public sector pipeline and demand is very strong, the ongoing government may impact deal timing in our U.S. federal business in Q4. Given the time line requirements to complete standard procurement processes, we've prudently factored in this timing dynamic into our guidance.

    Q&A highlights

    5

    How will ServiceNow ensure successful adoption of Agentic technology, especially with integration and implementation, given the complexity of enterprise processes?

    Bill McDermott emphasized that enterprises are moving away from 'toy sidecars' and proof-of-concepts, seeking platforms that integrate business processes into workflows. ServiceNow's platform, built on NVIDIA Nemotron, offers pre-packaged workflows and enables rapid autonomous implementations in weeks, not years, with zero latency, total security, and cost-effectiveness. Amit Zavery added that ServiceNow has 100+ prepackaged Agentic workflows, and they are investing in 'AI black belt' forward-deployed engineers to assist with specific use cases.

    “You have a platform here with AI platform for business transformation that resides above the systems of record and gives you that clean pane of glass to integrate the business processes into workflows.”

    asked by Kasthuri Rangan · answered by William McDermott

    2 min read6 chapters

    Detailed Narrative

    01

    AI Product Momentum and Adoption

    ServiceNow's AI products are on pace to exceed $0.5 billion in ACV this year, tracking ahead of the $1 billion target for 2026. Now Assist saw 12 deals over $1 million, including one over $10 million, and AI Control Tower deal volume quadrupled QoQ. AI Agent Assist consumption increased over 55x since May, indicating strong customer adoption and value realization, with 1,700 customers already live on these products.

    02

    Strategic Relevance and Market Positioning

    The company positions itself as the 'AI workflow company,' integrating with GPU leaders, hyperscalers, and foundation models. Management highlights ServiceNow's platform as critical for governing AI, solving integration challenges, and enabling cross-enterprise workflows, differentiating it from 'one-dimensional chatbots.' The company emphasizes its 'any cloud, any model, any data source, any agent' strategy, neutralizing complexity for customers.

    03

    CRM and Customer Experience Transformation

    ServiceNow is reshaping the customer experience market with its AI-first system of action, turning CRM into a growth and loyalty driver. New AI-powered CPQ solutions accelerate quote generation, and AI agents automate resolutions in service. The company is seeing displacement wins and multi-million dollar deals, partnering with companies like Genesys for unified experiences that merge contact centers, CRM, and service operations.

    04

    U.S. Federal Business Strength

    The U.S. Federal segment had a strong Q3, beating net new ACV expectations with over 30% YoY growth. Now Assist pilots are converting quickly into deals, and the AI Control Tower is gaining attention for governance and risk management. The GSA OneGov agreement is expected to boost efficiency by 30% and save the federal government billions over 5 years, accelerating Agentic AI transformation.

    05

    Operational Efficiency and Profitability

    Q3 saw significant outperformance in operating margin (33.5%, 300 bps above guidance) and free cash flow margin (17.5%, up 50 bps YoY). These improvements are attributed to top-line outperformance, AI OpEx efficiencies, and disciplined spend management. The company is leveraging AI agent deployments internally, with 90% of IT, customer service, and HR processes now handled by agents, unlocking organizational capacity and driving measurable efficiency gains.

    06

    Shareholder Value Initiatives

    The Board approved a 5-for-1 stock split to make shares more accessible and provide employees with greater equity flexibility, pending shareholder approval on December 5. The company also bought back approximately 644,000 shares in Q3, up nearly 70% QoQ, with $2 billion remaining authorization, aiming to manage dilution and demonstrate a healthy balance of growth, profitability, and shareholder value.

    AI-generated summary of the company’s earnings call. Not investment advice.