NOW
Earnings call · Dec 2025 (Q4 FY25)

ServiceNow Q4 FY25 earnings call NOW

Jan 28, 2026 Source

Executive summary

ServiceNow Q4 FY25 — Strong Beat, AI Monetization Accelerates, and Increased Capital Return

ServiceNow delivered a strong beat in Q4 FY25, driven by accelerating AI monetization and robust organic growth across its platform. The company emphasized its strategic position as an AI platform, not merely a feature-oriented SaaS provider, and addressed market speculation regarding AI's impact on software companies and M&A strategy. Management expressed high confidence in sustained profitable growth and increased capital returns, reinforcing its long-term vision.

Highlights

5

  • Q4 subscription revenue of $3.466 billion grew 19.5% year-over-year in constant currency, exceeding guidance by 150 basis points.

  • Current RPO (cRPO) grew 21% year-over-year in constant currency, beating guidance by 200 basis points.

  • Now Assist ACV surpassed $600 million, more than doubling NNACV year-over-year in Q4, with 35 deals over $1 million.

  • Full year 2025 free cash flow margin reached 35%, 100 basis points above already raised guidance, with total FCF of $4.6 billion, up 34% year-over-year.

  • Board authorized an incremental $5 billion share repurchase program, including an immediate $2 billion accelerated share repurchase.

Concerns

3

  • Gross margin pressure from hyperscaler adoption

  • Mix shift of on-prem hosted revenue

  • Dilution from Armis acquisition

Guidance & targets

CategoryTargetConfidence
Full-year 2026 Subscription Revenue
$15.53 billion - $15.57 billion
high materiality
High
Full-year 2026 Subscription Revenue Growth
19.5% - 20% year-over-year constant currency growth
high materiality
High
Full-year 2026 Subscription Gross Margin
82%
medium materiality
High
Full-year 2026 Non-GAAP Operating Margin
32%
high materiality
High
Full-year 2026 Free Cash Flow Margin
36%
high materiality
High
Full-year 2026 GAAP Diluted Weighted Average Outstanding Shares
1.05 billion
low materiality
High
Q1 2026 Subscription Revenue
$3.650 billion - $3.655 billion
high materiality
High
Q1 2026 Subscription Revenue Growth
18.5% - 19% year-over-year constant currency growth
high materiality
High
Q1 2026 cRPO Growth
20% constant currency growth
high materiality
High
Q1 2026 Non-GAAP Operating Margin
31.5%
medium materiality
High
Q1 2026 GAAP Diluted Weighted Average Outstanding Shares
1.05 billion
low materiality
High
Now Assist ACV
$1 billion-plus
high materiality
High
Subscription Revenue and Now Assist ACV targets
Achieve previously stated targets
high materiality
High
Operating Margin Expansion
Continue delivering operating margin expansion
high materiality
High

Segment performance

SegmentRevenueYoYQoQMargin
Transportation and Logistics
Led the way with net new ACV growth.
—over 80%——
Business and Consumer Services
Posted impressive growth.
—surpassing 70%——
Financial Services
—over 40%——
Technology Workflows
Net new ACV growth accelerated both quarter-over-quarter and year-over-year.
——accelerated—
ITOM
Standout performance in net new ACV.
—nearly 50%——
Security and Risk
Drove net new ACV growth.
—nearly 40%——
Global Government Business
On fire across Europe, Middle East and Asia.
—80%——

Operational metrics

Non-GAAP Operating Margin
31% 1 point above guidance
Q4 FY25
Full Year Non-GAAP Operating Margin
31% up 150 basis points year-over-year
FY25
Free Cash Flow Margin
57% up 950 basis points year-over-year
Q4 FY25

Driven by strong collections, lower CapEx, and significant operating leverage.

Full Year Free Cash Flow Margin
35% up 350 basis points year-over-year, 100 basis points above raised guidance
FY25
Cash and investments balance
over $10 billion
end of FY25
Shares Repurchased
approximately 3.6 million
Q4 FY25
Share Repurchase Authorization Remaining
approximately $1.4 billion
end of Q4 FY25
Incremental Share Repurchase Authorization
$5 billion additional
announced

Authorized by Board of Directors.

Accelerated Share Repurchase Program
$2 billion
immediate
NNACV Growth
accelerated quarter-over-quarter and year-over-year
Q4 FY25
Deals over $1 million in NNACV
244
Q4 FY25
Deals over $10 million in NNACV
7
Q4 FY25
RaptorDB Pro NNACV Growth
more than tripled year-on-year
Q4 FY25
Workflow Data Fabric Attach Rate
increased every quarter
2025

Workflow Data Fabric was in 16 of top 20 Q4 deals.

Monthly Active Users Growth
25%
Q4 FY25
Now Assist NNACV Growth
more than doubled year-over-year
Q4 FY25
Now Assist Deals over $1 million
35
Q4 FY25
AI Control Tower Deal Volume
nearly tripled quarter-over-quarter
Q4 FY25
Workflows Growth
over 33%
Q4 FY25
Transactions Growth
over 33%
Q4 FY25
New Logo Net New ACV Growth (EMEA and Japan)
nearly 30% year-over-year
FY25
Customers with over $5 million ACV
603
end of FY25
Customers with over $20 million ACV
rose over 30% year-over-year
FY25
Now Assist Deals over $1 million (Q4)
nearly tripled quarter-over-quarter
Q4 FY25
Now Assist Customers spending over $1 million
over 40%
Q4 FY25
Now Assist Deals with 5+ products
over 10x year-over-year
Q4 FY25
Customer Service Now Assist Upsell Expansion at Renewal
over 70%
Q4 FY25
Target Market Seats
1.3 billion
estimated

Estimated available seats in the target market.

AI Agents Forecast
2.2 billion
by 2030
Email to case conversion accuracy
91%
current

Achieved using ServiceNow out-of-the-box agents.

Help desk triage routing accuracy
99%
current

Achieved using ServiceNow agents, saving tens of thousands of hours annually.

Now Assist average deal size
$500,000
Q4 FY25

Average deal size for Now Assist packs.

Industry KPIs

MetricValueDetails
Revenue growth$3.466 billion USD
Arr net new arr$600 million ACV
Rpo current rpo$12.85 billion USD
Customer account count8,800 customers
Large deal new logo metrics244 deals
Multi product platform attach16 deals
Operating FCF margin rule of 4031% %
Ai product adoption monetization$600 million ACV
Net revenue net dollar retention98% %

Orderbook & backlog

Remaining Performance Obligations (RPO) $28.2 billion Q4 FY25

22.5% year-over-year constant currency growth

Includes 1 point contribution from Moveworks.

Current RPO (cRPO) $12.85 billion Q4 FY25

21% year-over-year constant currency growth

Includes 1 point contribution from Moveworks. Beat guidance by 200 basis points.

Deals & partnerships

Moveworks AI-powered employee experience platform

Acquisition to enhance employee experience and serve as a 'front door to the agentic enterprise'.

Veza Identity governance and security

Acquisition to solve identity governance problem through patented Access Graph technology, mapping access relationships and privileges across humans, machines, and AI agents.

Armis Asset visibility and security

Acquisition to solve the visibility problem by providing real-time agentless discovery and classification of every asset across the enterprise (IT, OT, IoT, medical devices, shadow IT).

FedEx Dataworks Supply chain predictive intelligence

Collaboration to combine ServiceNow's orchestration with FedEx's data to provide procurement leaders with trusted insights and source-to-pay solutions. FedEx is expanding its use of the ServiceNow AI platform.

Microsoft Deep AI integration

Deep AI integration connecting copilots, agents, and data across Microsoft 365 and the ServiceNow AI platform. Introduces Microsoft's Agent 365 integration, anchored by ServiceNow's AI Control Tower, for enterprise AI interoperability and autonomous AI workflows.

Anthropic Expanded AI integration

Expanded partnership to integrate Claude models more deeply into the ServiceNow AI platform, supporting secure, compliant AI across industries. Anthropic's coding agent is used for generating code for workflows on ServiceNow.

OpenAI AI model access and integration

New collaboration to enable direct customer access to frontier model capabilities and custom ServiceNow AI solutions. OpenAI models will be a preferred intelligence capability for several agentic use cases, including voice AI and speech-to-speech real-time multimodal capabilities for CRM products.

NTT DATA Strategic AI delivery partner

Expanded strategic partnership to accelerate AI-led transformation for global enterprises. Includes co-developing and co-selling AI-powered solutions and scaling NTT DATA's use of ServiceNow's AI platform.

Risks & headwinds

Gross margin pressure from hyperscaler adoption FY26

Subscription gross margin expected to be 82% in FY26, reflecting incremental data center investments.

Mitigation:Strategic focus on hyperscalers, with margins expected to improve as deals scale. Offsetting any headwind with OpEx efficiencies and disciplined spend management to ensure continued operating margin accretion.

Mix shift of on-prem hosted revenue Q1 FY26

1.5 point headwind to Q1 FY26 subscription revenue growth.

Mitigation:Partially driven by strong adoption of hyperscaler offerings, indicating a strategic shift rather than a demand issue.

Dilution from Armis acquisition FY26

Up to 50 bps headwind to operating margin in FY26.

Mitigation:Expected to be absorbed by strong organic operating leverage, with continued operating margin expansion in FY27.

What to watch in Q1 FY26

Q1 FY26 Subscription Revenue Growth

Q1 FY26
Current 19.5% to 20% CC YoY (FY26 guide)
Target 18.5% to 19% CC YoY

Why it matters

This is the primary top-line indicator for the upcoming quarter, reflecting the impact of Moveworks contribution and the on-prem hosted revenue mix shift.

For Q1, we expect subscription revenues between $3.650 billion and $3.655 billion, representing 18.5% to 19% year-over-year growth on a constant currency basis.

Q&A highlights

What are the tailwinds and headwinds in the demand environment and how will AI monetization, particularly consumption, play out through the year, given the $600M ACV already achieved?

Bill McDermott highlighted strong demand for platforms that consolidate legacy systems and deliver fast ROI, driven by CEOs investing in autonomy and margin improvement. He noted that pipelines are strong, even with federal shutdown impacts. Amit Zavery added that the hybrid pricing model with assist packs is resonating, with customers renewing and expanding as they consume more tokens, especially with agentic use cases.

“Our pipelines have never been better. Let me be clear, never been better.”

asked by Aleksandr Zukin · answered by William McDermott

2 min read 5 chapters

Detailed narrative

AI as a Platform for Business Reinvention

ServiceNow positions itself as the 'AI Control Tower' and semantic layer for enterprise AI, emphasizing that AI is probabilistic while workflow orchestration is deterministic. The company argues that AI depends on orchestration, governance, and scale, making its platform strategically relevant for embedding AI into workflows where business decisions are made. This approach aims to consolidate hundreds of feature-specific software solutions into end-to-end business processes, driving radical simplification and cost reduction for customers.

Addressing Market Speculation and Valuation

Management directly addressed market speculation regarding AI's impact on software companies and ServiceNow's valuation. CEO Bill McDermott stated that ServiceNow is a 'platform company' executing a long-term strategy, not a 'feature-oriented SaaS company.' He highlighted the company's organic growth track record, being the fastest enterprise software company to reach $1B, $5B, and $10B organically, and asserted that M&A is used for TAM expansion and technology, not revenue necessity. The company aims to be the 'AI defining enterprise software company' of the 21st century.

Strategic M&A and Security Vision

The acquisitions of Veza and Armis are described as critical for securing the 'agentic AI world,' expanding ServiceNow's TAM beyond $600 billion. Armis provides real-time agentless asset visibility, while Veza solves identity governance for humans, machines, and AI agents. Integrated with ServiceNow's CMDB, this creates a unified, end-to-end security exposure and operation stack for autonomous, proactive cybersecurity. Management clarified that no other large-scale M&A is on the roadmap post-Armis, and the acquisitions were chosen for their existing integration with ServiceNow.

Customer Success and ROI with AI

Numerous customer examples demonstrated significant ROI from ServiceNow's AI platform. A U.S. consumer services company achieved 400% ROI and expanded Now Assist entitlement by 8x, transitioning to 80% automated support. A European telecom reduced costs by 30% and cycle time by 25%. An industrial multinational saw 90% of help desk requests handled by agents, reducing triage time by 50% with 99% routing accuracy. These cases highlight how ServiceNow's AI-driven workflows lead to substantial cost savings, efficiency gains, and improved customer experience.

Partnership Ecosystem Expansion

ServiceNow is deepening its ecosystem partnerships with hyperscalers, language model companies, and system integrators. Key collaborations include Microsoft for Agent 365 integration and AI Control Tower interoperability, Anthropic for deeper Claude model integration and coding agents, OpenAI for direct customer access to frontier model capabilities, and NTT DATA as a strategic AI delivery partner. These partnerships aim to leverage unique capabilities and co-develop AI-powered solutions, ensuring customer choice and accelerating AI adoption.

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