NOW Q2 2025: 100% YoY New Logo ACV Growth Fuels 2% Revenue Beat
- AI Transformation and Productivity Gains: Executives emphasized that ServiceNow’s robust AI initiatives are driving cross‑functional workflow automation and improving productivity (e.g., a significant reduction in setup work and enhanced sales/engineering efficiency), positioning the company for exponential value creation.
- Robust New Logo Growth: Management highlighted impressive new logo performance with new logo ACV growing over 100% YoY and multiple sizable deals, indicating strong market adoption and an expanding customer base for future revenue growth.
- Strong Leadership and Execution: The Q&A showcased confidence in ServiceNow’s seasoned go‑to‑market leadership across regions, underscoring effective strategic execution and operational resilience in navigating the AI transformation.
- Uncertainty in Public Sector Engagement: Concerns over tightening federal budgets and evolving mission demands were raised, suggesting that if U.S. federal spending underperforms, the anticipated growth in this segment could be adversely affected.
- Dependence on AI-Driven Growth Amid High Capital Intensity: Questions were posed about the significant capital outlays and IT budget pressures tied to hyperscaler infrastructure and AI platform deployment, implying that if customer adoption of these advanced AI solutions lags, margins could face downward pressure.
- Risks Related to Strategic Deal Timing and Sales Execution: Analysts highlighted potential challenges such as the timing of critical deals like Moveworks and the need for potentially increased headcount in sales and marketing, which might pressure operational efficiency and margin performance if these initiatives experience delays.
| Metric | YoY Change | Reason |
|---|---|---|
Total Revenue | +22% | Total Revenue grew by 22% YoY to $3,215 million in Q2 2025 driven by strong subscription revenue growth and enhanced deal flow, building on the Q1 2024 increase of 24% (from $2,096 million to $2,603 million) and Q1 2025 growth supported by new customer acquisitions and expanded product portfolios. |
North America Revenue | +20% | North America Revenue increased by 20% YoY to $2,006 million reflecting robust digital workflow product adoption and continued subscription growth, consistent with the Q1 2024 25% increase in subscription revenue and the underlying market expansion noted in previous periods. |
EMEA Revenue | +26% | EMEA Revenue rose by roughly 26% YoY to $834 million based on the overall global subscription momentum seen across regions. While Q1 2024 narratives cited general customer purchasing trends, the Q2 2025 improvement further indicates an acceleration in regional adoption despite limited specific regional drivers. |
Asia Pacific and Other Revenue | +25% | Asia Pacific and Other Revenue increased by nearly 25% YoY to $375 million continuing the strong trend from Q1 2024’s 31.8% growth (from $220 million to $290 million) and Q1 2025 modest gains, indicating enhanced market penetration in the region without distinct category-specific catalysts mentioned in prior periods. |
| Metric | Period | Previous Guidance | Current Guidance | Change |
|---|---|---|---|---|
Subscription Revenues | Q3 2025 | $3.030 - $3.035 (19% to 19.5% YoY growth, 19.5% constant currency) | $3,260 - $3,265 (20% to 20.5% YoY growth, 19.5% constant currency) | raised |
CRPO Growth | Q3 2025 | 19.5% (reported and constant currency) | 18.5% (or 18% on a constant currency basis) | lowered |
Operating Margin | Q3 2025 | 27% | 30.5% | raised |
GAAP Diluted Weighted Average Outstanding Shares | Q3 2025 | 209 | 210 | raised |
Subscription Revenues | FY 2025 | $12.64 - $12.68 (18.5% to 19% YoY growth, 19.5% constant currency) | Raised by $125 million at the midpoint to $12,775 - $12,795 (20% YoY growth, 19.5% to 20% on a constant basis) | raised |
Subscription Gross Margin | FY 2025 | 83.5% | 83.5% | no change |
Operating Margin | FY 2025 | 30.5% | 30.5% | no change |
Free Cash Flow Margin | FY 2025 | 32% | 32% | no change |
GAAP Diluted Weighted Average Outstanding Shares | FY 2025 | 209 | 210 | raised |
| Topic | Previous Mentions | Current Period | Trend |
|---|---|---|---|
AI Transformation | Previously emphasized as a strategic driver with a focus on modernizing legacy systems and delivering cross‐functional transformation ( ). | In Q2 2025, AI Transformation is highlighted as a major growth engine with the introduction of the Now Next AI program and deep integration into enterprise workflows ( ). | Consistently prioritized with enhanced integration and new initiatives driving transformation. |
Agentic AI | Earlier calls discussed prepackaged capabilities, orchestration, and strong customer success stories ( ). | Q2 2025 continues to treat Agentic AI as transformative by enabling true AI agents to execute real tasks across operations ( ). | Stable emphasis with growing maturity and broader customer application. |
Productivity Gains | Prior periods reported measurable improvements (e.g., IT support, case deflection, reduced resolution times) that boosted operational efficiency ( ). | Q2 2025 features substantial productivity boosts, including a 50% improvement in sales productivity and significant headcount savings ( ). | Consistently positive impact with increasing quantifiable benefits. |
Robust New Logo and High-Value Segment Growth | Earlier discussions in Q4 2024 and Q3 2024 highlighted record new logo deals, high-value contracts, and expanding customer segments ( ). | Q2 2025 reinforces this trend with 11 new logo deals over $1 million (including multi-million deals) and a growing number of customers in high-value segments ( ). | Accelerating growth with larger deals and expanding high-value customers. |
Strategic Acquisitions, Integration, and Sales Execution Risks | Q1 2025 focused on acquisitions like Moveworks and Logik.ai with integration strategies and noted sales risks in federal and enterprise segments ( ). | In Q2 2025, strategic acquisitions (e.g., Data.World, Logic AI) and expanded partnerships are discussed along with an improved selling environment and mitigated risks ( ). | Persistent focus with evolving strategies to integrate acquisitions and mitigate risks. |
Hybrid Pricing Model Adoption and Revenue Recognition Uncertainties | Q1 2025 and Q4 2024 discussed a hybrid pricing model combining subscription and consumption elements with noted timing shifts in revenue recognition ( and ). | There is no mention of these topics in Q2 2025. | Currently less emphasized; not a focus in the current period. |
Public Sector Engagement and Federal Pipeline Dynamics | Previous periods showcased strong public sector growth, with detailed federal deal activity and evolving pipeline strategies ( in Q1, in Q4, and in Q3). | Q2 2025 reports engagement with six new federal logos and acknowledges ongoing budget constraints while remaining cautiously optimistic ( ). | Steady engagement with close attention to federal budget challenges and pipeline realism. |
Leadership, Strategic Hiring, and Operational Execution | Across Q1, Q3, and Q4 2024, leadership changes, strategic hiring, and operational excellence were highlighted to drive transformation and market success ( and and ). | In Q2 2025, leadership strength is underscored with key promotions, aggressive strategic hiring, and execution exceeding guidance metrics ( ). | Consistently strong leadership with intensified focus on talent and operational efficiency. |
Macroeconomic and Geopolitical Uncertainties | Prior discussions in Q1 and Q3 2024 recognized market uncertainties and a value-based environment, with cautious guidance adjustments ( and ). | Q2 2025 describes these uncertainties as the “new norm” and stresses the need to adapt with AI-driven strategies ( ). | An enduring concern with evolving adaptation approaches to manage uncertainty. |
Capital Intensity and AI Infrastructure Investment Challenges | Q3 2024 briefly mentioned significant AI-related investments (e.g., data center in the U.K.) implying capital intensity ( ). | No mention in Q2 2025. | Not a current focus; limited discussion compared to earlier periods. |
Platform Innovation and Differentiation | Previous calls highlighted RaptorDB Pro and unified AI orchestration as key differentiators that enhance speed, cost efficiency, and integration ( in Q1, in Q4, and in Q3). | Q2 2025 continues to emphasize platform innovation with strong traction for Raptor DB Pro and integrated AI orchestration that unifies the tech stack across workloads ( ). | Consistently prioritized with clear competitive differentiation through ongoing innovation. |
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Margin Outlook
Q: Will productivity gains boost margins?
A: Management noted a 29.5% operating margin in Q2 driven by AI productivity while carefully reinvesting gains, keeping full‐year guidance steady despite robust efficiency improvements. -
Competitive Edge
Q: What core asset drives AI success?
A: Bill underscored ServiceNow’s unique platform with 65 billion workflows that delivers secure, low-cost, and integrated operations—central to its AI transformation. -
Revenue Upside
Q: Why did revenue exceed guidance?
A: The team explained a 2% revenue upside from strong new ACV performance and early on-prem renewals, reinforcing their steady growth trajectory. -
Now Assist Adoption
Q: How is Now Assist performing?
A: They reported a nine-fold increase in Now Assist usage over recent months, which is boosting ACV and enhancing customer engagement. -
Execution Improvement
Q: What’s behind improved execution?
A: Leaders attributed better-than-expected execution to a disciplined culture and accelerated AI traction, which is reshaping their business processes. -
Control Tower
Q: Will AI Control Tower manage all agents?
A: Management confirmed that the AI Control Tower centralizes control by integrating any model or agent, streamlining complex enterprise operations. -
Front Office Workflows
Q: What front office opportunities exist?
A: With Logic AI closed, new front office opportunities in sales, CPQ, and order management are emerging, promising enhanced efficiency and streamlined customer service. -
New Logo Growth
Q: Are new logos expanding quickly?
A: The company is gaining strong momentum with new logos, with increasing deal sizes that underscore both market penetration and expanded ACV. -
Sales Hiring
Q: Will hiring increase if Moveworks delays?
A: Gina emphasized that sales hiring will remain aligned with market demands, as current headcount is sufficient, and adjustments are made only when needed. -
Go-to-Market Strength
Q: How robust is the GTM leadership?
A: Bill expressed strong confidence in his seasoned global leadership team, which is driving effective execution and ensuring operational excellence across all regions. -
Market Environment
Q: Has the selling environment improved?
A: Despite ongoing geopolitical uncertainties, Bill noted that the market remains wide open for AI innovation, with stable demand driving steady sales. -
Public Sector Pipeline
Q: How is the federal pipeline progressing?
A: Gina pointed out that the federal team executed strongly, closing six new logos in Q2, which bodes well for future public-sector opportunities.
Research analysts covering ServiceNow.