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    NOW
    Earnings call· Dec 2025(Q4 FY25)

    ServiceNow, Inc. 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

    14
    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

    7
    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

    32
    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 billionadditional
    announced

    Authorized by Board of Directors.

    Accelerated Share Repurchase Program
    $2 billion
    immediate
    NNACV Growth
    acceleratedquarter-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 tripledyear-on-year
    Q4 FY25
    Workflow Data Fabric Attach Rate
    increasedevery 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 doubledyear-over-year
    Q4 FY25
    Now Assist Deals over $1 million
    35
    Q4 FY25
    AI Control Tower Deal Volume
    nearly tripledquarter-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 tripledquarter-over-quarter
    Q4 FY25
    Now Assist Customers spending over $1 million
    over 40%
    Q4 FY25
    Now Assist Deals with 5+ products
    over 10xyear-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

    9
    MetricValueDetails
    Revenue growth$3.466 billionUSD
    Arr net new arr$600 millionACV
    Rpo current rpo$12.85 billionUSD
    Customer account count8,800customers
    Large deal new logo metrics244deals
    Multi product platform attach16deals
    Operating FCF margin rule of 4031%%
    Ai product adoption monetization$600 millionACV
    Net revenue net dollar retention98%%

    Orderbook & backlog

    2
    Remaining Performance Obligations (RPO)$28.2 billionQ4 FY25

    22.5% year-over-year constant currency growth

    Includes 1 point contribution from Moveworks.

    Current RPO (cRPO)$12.85 billionQ4 FY25

    21% year-over-year constant currency growth

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

    Deals & partnerships

    8
    MoveworksAI-powered employee experience platform

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

    VezaIdentity 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.

    ArmisAsset 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 DataworksSupply 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.

    MicrosoftDeep 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.

    AnthropicExpanded 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.

    OpenAIAI 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 DATAStrategic 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

    3
    Gross margin pressure from hyperscaler adoptionFY26

    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 revenueQ1 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 acquisitionFY26

    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

    5

    Q1 FY26 Subscription Revenue Growth

    Q1 FY26
    Current19.5% to 20% CC YoY (FY26 guide)
    Target18.5% 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

    8

    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 read5 chapters

    Detailed Narrative

    01

    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.

    02

    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.

    03

    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.

    04

    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.

    05

    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.