NOW Q2 2025 Earnings

{ "callDetails": { "callTitle": "ServiceNow, Inc. Q2 2025 Earnings Call", "dateTime": "July 23, 2025 at 9:00 PM UTC", "managementTeam": [ { "name": "Darren Yip", "title": "Senior Vice President, Head of Investor Relations and Market Insights" }, { "name": "Bill McDermott", "title": "Chairman and Chief Executive Officer" }, { "name": "Gina Mastantuono", "title": "President and Chief Financial Officer" }, { "name": "Amit Zavery", "title": "President, Chief Product Officer, and Chief Operating Officer" } ] }, "callSummary": { "sections": [ { "title": "Financial Performance", "importance": "major", "bullets": [ "Q2 subscription revenues (non-GAAP) were $3.113B, growing 21.5% year-over-year in constant currency and beating guidance by 200 basis points.", "RPO ended the quarter at approximately $23.9B, representing 25.5% year-over-year constant currency growth, and current RPO was $10.92B, up 21.5% year-over-year in constant currency.", "Non-GAAP operating margin was 29.5%, which was over 250 basis points above the company’s guidance range for the quarter.", "Free cash flow margin was 16.5%, which the company reported as up 3% year-on-year.", "The company reported 89 net new ACV deals greater than $1M in the quarter, including 11 deals greater than $5M, and stated 528 customers generating more than $5M in ACV.", "The company ended Q2 with $10.8B in cash and investments on the balance sheet." ] }, { "title": "Guidance", "importance": "major", "bullets": [ "2025 subscription revenue guidance was raised by $125M at the midpoint to a range of $12.775B to $12.795B, representing 20% year-over-year growth (19.5%–20% on a constant currency basis).", "The company reiterated an expected operating margin of 30.5% for full-year 2025 and reiterated an expected free cash flow margin of 32% for 2025.", "The company continues to expect subscription gross margin of 83.5% for 2025.", "Q3 subscription revenue guidance is $3.260B to $3.265B, representing 20% to 20.5% year-over-year growth (approximately 19.5% constant currency).", "The company guided CRPO year-over-year growth for Q3 at 18.5% (18% on a constant currency basis) and noted a 200 basis point headwind due to a larger-than-average customer cohort renewing in Q4.", "The company expects GAAP diluted weighted average shares outstanding of 210 million for both Q3 and full-year 2025." ] }, { "title": "Capital Allocation", "importance": "minor", "bullets": [ "The company repurchased approximately 381,000 shares in Q2 under its repurchase program and reported approximately $2.6B of repurchase authorization remaining at quarter end.", "The company reported $10.8B in cash and investments at quarter end as part of a stated robust balance sheet position.", "Guidance and commentary explicitly excluded any contribution from the expected MoveWorks acquisition, which the company expects to close late in H2 2025 or early 2026.", "The company stated share repurchases are used primarily to manage dilution and that repurchase activity is ongoing within the stated authorization." ] }, { "title": "ARR / Recurring Revenue Growth", "importance": "major", "bullets": [ "Subscription revenue growth was 21.5% year-over-year in constant currency for Q2, reported as the primary recurring revenue metric.", "RPO (reported as a GAAP measure in the release) was approximately $23.9B, up 25.5% year-over-year in constant currency, signaling multi-period contracted revenue strength.", "Current RPO was $10.92B, growing 21.5% year-over-year in constant currency and beating guidance by 200 basis points.", "The company did not disclose an explicit ARR number in the prepared remarks or Q&A.", "The company stated Knowledge 2025 generated a newly created pipeline in excess of $1.2B to date, which management cited as a leading indicator for recurring revenue growth.", "The company disclosed that number of customers contributing more than $20M in ACV increased by over 30% year-over-year, indicating expansion at the top of the customer base." ] }, { "title": "Retention & Expansion", "importance": "major", "bullets": [ "The company reported a renewal rate of 98% for Q2, which it presented as evidence of customers’ strategic reliance on the platform.", "Net new ACV performance included 89 deals greater than $1M and 11 deals greater than $5M in the quarter, demonstrating continued large-deal momentum.", "Average new-logo ACV grew over 100% year-over-year, according to the company’s prepared remarks.", "All top 20 deals in the quarter included five or more products, which the company used to illustrate cross-sell effectiveness and platform stickiness.", "Product-level expansion was material in AI-related offers, with ITSM Plus and CSM Plus deal values reported as quadrupling year-over-year and ITOM Plus reported as tripling year-over-year.", "Creator NowAssist average deal size was reported to have quadrupled year-over-year, indicating expansion in developer/creator-led consumption." ] }, { "title": "AI Strategy & Monetization", "importance": "minor", "bullets": [ "NowAssist and ProPlus packs were cited as material revenue drivers, with Bill McDermott noting a largest NowAssist deal in excess of $20M in Q2.", "The company reported key AI ProPlus deal count up over 50% quarter-over-quarter and stated NowAssist products were included in 18 of the top 20 deals.", "ITAM NowAssist Net New ACV was reported to have surged nearly 6x quarter-over-quarter, and NowAssist for SecOps and Risk combined more than doubled quarter-over-quarter.", "Company reiterated a target of $1B in NowAssist ACV by 2026 and described add-on Plus SKUs as off to a 'stellar start.'", "The company described Control Tower, AI agent fabric, and agent studio as platform-level offerings intended to monetize across any LLM and any data source, emphasizing platform rather than single-feature monetization." ] }, { "title": "Margins & Operating Leverage", "importance": "minor", "bullets": [ "Q2 non-GAAP operating margin was 29.5%, reported as more than 250 basis points ahead of guidance, with AI OpEx efficiencies called out as a primary driver.", "The company said AI-driven internal efficiencies, including Now on Now tooling (Code Assist and Code Generation), unlocked engineering capacity and contributed to margin expansion.", "Gina Mastantuono stated the company realized about $100M in savings and headcount benefits referenced at Knowledge for 2025, and Bill referenced a $350M figure when discussing potential value from AI efficiencies.", "The company signaled deliberate reinvestment and prudence, noting timing of marketing spend shifted into Q3 and Q4 and citing reserved capacity to absorb potential margin headwinds from the MoveWorks acquisition if it closes late in H2." ] } ] }, "notableQuotes": [ { "quote": "Subscription revenue growth was 21.5% in constant currency, two points above our guidance.", "speakerName": "Bill McDermott" }, { "quote": "Operating margin was 29.5%.", "speakerName": "Bill McDermott" }, { "quote": "Free cash flow margin was 16.5%, up 3% year on year.", "speakerName": "Bill McDermott" }, { "quote": "We had 89 deals greater than a million in net new ACV.", "speakerName": "Bill McDermott" }, { "quote": "Our key AI ProPlus deal count... was up over 50% quarter on quarter.", "speakerName": "Bill McDermott" }, { "quote": "ITAM Now Assist NetNew ACV surged nearly 6x quarter-over-quarter.", "speakerName": "Gina Mastantuono" }, { "quote": "We ended Q2 with 528 customers, generating over 5 million in ACV.", "speakerName": "Gina Mastantuono" }, { "quote": "We are raising our subscription revenues by $125 million at the midpoint to $12.775 billion to $12.795 billion, representing 20% year-over-year growth.", "speakerName": "Gina Mastantuono" }, { "quote": "The newly created pipeline is up over $1.2 billion already.", "speakerName": "Gina Mastantuono" }, { "quote": "We continue to expect operating margin of 30.5%.", "speakerName": "Gina Mastantuono" } ], "qaSummary": [ { "question": { "analystName": "Alex Zicken", "firm": "Wolf Research", "summary": "What is driving better-than-expected execution and whether AI traction or competitive dynamics have changed?" }, "answers": [ { "executiveName": "Bill McDermott", "executiveTitle": "Chairman and Chief Executive Officer", "quality": "Direct", "newInfo": "Partial", "guidance": "No", "summary": "Attributed the improved execution primarily to AI, calling agentic AI a step-change for customers and citing cross-functional AI work and platform differentiation. He provided supporting specifics including 450,000 agents in workflows and a cited '50% improvement in sales productivity' example, but did not provide incremental financial guidance." }, { "executiveName": "Gina Mastantuono", "executiveTitle": "President and Chief Financial Officer", "quality": "Partial", "newInfo": "Partial", "guidance": "No", "summary": "Characterized federal/public sector conditions as anticipated and said the company built prudence into assumptions for US federal demand; noted the federal team closed six new logos in Q2, but gave no new numerical guidance beyond reiterating that current guidance contemplates those trends." } ] }, { "question": { "analystName": "Mark Murphy", "firm": "JP Morgan", "summary": "Will AI Control Tower be used as the central control plane for third-party agents and could ServiceNow agents replace third-party agents if Nemotron LLM succeeds?" }, "answers": [ { "executiveName": "Bill McDermott", "executiveTitle": "Chairman and Chief Executive Officer", "quality": "Direct", "newInfo": "Partial", "guidance": "No", "summary": "Stated the Control Tower is intended as a central controller that can manage ServiceNow and third-party agents across any cloud, data source, or LLM, and argued customers will want a single control plane. No product-release timing or quantitative displacement estimates were provided." }, { "executiveName": "Amit Zavery", "executiveTitle": "President, Chief Product Officer, and Chief Operating Officer", "quality": "Direct", "newInfo": "Partial", "guidance": "No", "summary": "Confirmed progress with NVIDIA on the Nemotron model as an option to speed reasoning, planning, and execution, and reiterated that customers will have model choice (OpenAI, Gemini, Nemotron) with prescriptive control via Control Tower. No commercial adoption metrics or timing for Nemotron were disclosed." } ] }, { "question": { "analystName": "Brad Zelnick", "firm": "Deutsche Bank", "summary": "Where are the most immediate front-office opportunities after the Logic AI acquisition and what are the lowest-hanging fruits?" }, "answers": [ { "executiveName": "Bill McDermott", "executiveTitle": "Chairman and Chief Executive Officer", "quality": "Direct", "newInfo": "Partial", "guidance": "No", "summary": "Pointed to sales order management, CPQ, service management, and industry-specific workflows as immediate opportunities and cited nine CPQ deals closed in June as evidence of near-term traction. No quantified TAM or revenue timing for Logic AI integration was provided." }, { "executiveName": "Amit Zavery", "executiveTitle": "President, Chief Product Officer, and Chief Operating Officer", "quality": "Direct", "newInfo": "No", "guidance": "No", "summary": "Reiterated that ServiceNow can address complicated, outcome-driven CRM workflows end-to-end with workflow engine and CPQ/order management capabilities, but did not provide specific adoption metrics beyond qualitative traction statements." } ] }, { "question": { "analystName": "Kash Rangan", "firm": "Goldman Sachs", "summary": "What is ServiceNow's core asset that will allow it to prosper amid hyperscaler-led AI infrastructure investment and uncertainty about AI?" }, "answers": [ { "executiveName": "Bill McDermott", "executiveTitle": "Chairman and Chief Executive Officer", "quality": "Direct", "newInfo": "Partial", "guidance": "No", "summary": "Framed ServiceNow's core asset as large-scale workflow and enterprise-readiness, citing 'a trillion transactions' and '65 billion workflows in flight' as differentiation for governance, compliance, and data integration. He asserted hyperscalers will partner with ServiceNow for enterprise solutions but offered no measurable evidence beyond these usage-scale statements." } ] }, { "question": { "analystName": "Carl Christed", "firm": "UBS", "summary": "Was there any incremental change in the selling environment in Q2 versus prior quarter that explains improved results?" }, "answers": [ { "executiveName": "Bill McDermott", "executiveTitle": "Chairman and Chief Executive Officer", "quality": "Direct", "newInfo": "No", "guidance": "No", "summary": "Stated demand remains broadly consistent but is 'wide open' for AI innovation, and attributed better outcomes to customers prioritizing agentic AI rather than a macro shift. No quarter-specific pipeline metrics beyond earlier pipeline and deal counts were disclosed." } ] }, { "question": { "analystName": "Matt Hedberg", "firm": "RBC Capital Markets", "summary": "How are ProPlus / NowAssist packs resonating and how might that revenue source grow?" }, "answers": [ { "executiveName": "Amit Zavery", "executiveTitle": "President, Chief Product Officer, and Chief Operating Officer", "quality": "Direct", "newInfo": "Partial", "guidance": "No", "summary": "Said ProPlus adoption ramped quickly with usage up about 9x over recent months and customers adding more ProPlus capabilities as agentic deployments expand; he did not provide revenue run-rate or formal conversion metrics beyond usage growth statements.", }, { "executiveName": "Gina Mastantuono", "executiveTitle": "President and Chief Financial Officer", "quality": "Direct", "newInfo": "No", "guidance": "No", "summary": "Reiterated confidence in the $1B NowAssist ACV target by 2026 and said ProPlus continues to grow above expectations, without providing an incremental timeline for hitting the $1B milestone beyond the 2026 target." } ] }, { "question": { "analystName": "Keith Weiss", "firm": "Morgan Stanley", "summary": "Q2 outperformance on operating margin versus flat full-year guide — are efficiencies, timing, or investments explaining the gap?" }, "answers": [ { "executiveName": "Gina Mastantuono", "executiveTitle": "President and Chief Financial Officer", "quality": "Direct", "newInfo": "Partial", "guidance": "No", "summary": "Explained Q2 upside was driven by AI-related productivity and timing of marketing spend shifting into later quarters; emphasized prudence to reserve capacity for MoveWorks timing and continued investment in AI-related sales and engineering hires. No incremental full-year margin change was provided beyond the reiterated 30.5% operating margin guide." }, { "executiveName": "Amit Zavery", "executiveTitle": "President, Chief Product Officer, and Chief Operating Officer", "quality": "Direct", "newInfo": "No", "guidance": "No", "summary": "Described co-innovation with customers and that productizing customer work will capture learnings; he emphasized that costs are being converted into repeatable product IP rather than permanent per-deal cost, but did not quantify impact on margins." } ] }, { "question": { "analystName": "Derrick Wood", "firm": "Collin", "summary": "What drove the 2% upside to revenue guide and was the technology workflow mix shift a one-time event or a trend?" }, "answers": [ { "executiveName": "Gina Mastantuono", "executiveTitle": "President and Chief Financial Officer", "quality": "Direct", "newInfo": "Partial", "guidance": "No", "summary": "Attributed the 2% upside to net new ACV outperformance and stronger-than-expected on-prem/self-hosted renewals from the second half of 2025, and cautioned that quarter-to-quarter mix shifts can be deal-driven so advised against over-interpreting a single-quarter mix change. She provided product-specific net new ACV growth figures for ITAM and security but did not commit to a persistent mix shift." } ] }, { "question": { "analystName": "Mike Sikas", "firm": "Needham", "summary": "Are new logos increasing due to AI innovation and what is Now Next AI program?" }, "answers": [ { "executiveName": "Gina Mastantuono", "executiveTitle": "President and Chief Financial Officer", "quality": "Direct", "newInfo": "Yes", "guidance": "No", "summary": "Reported strong new-logo performance with 11 net new ACV deals >$1M (two >$5M) and average new-logo ACV up over 100% year-over-year, and stated that new logos are a strategic growth vector. She noted Now Next AI is an initiative to deploy senior engineering, sales consulting, and solution consulting expertise to accelerate enterprise AI adoption, and said any incremental hiring for that initiative is included in the current guide." }, { "executiveName": "Amit Zavery", "executiveTitle": "President, Chief Product Officer, and Chief Operating Officer", "quality": "Direct", "newInfo": "Partial", "guidance": "No", "summary": "Described Now Next AI as a senior-level, strategic, customer-facing program that co-deploys engineering and go-to-market talent to accelerate use-case delivery; he said the program focuses on targeted deployment of existing expertise rather than broad incremental hiring." } ] }, { "question": { "analystName": "Gregg Moskowitz", "firm": "Mizuho", "summary": "How are recent sales