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ServiceNow, Inc. (NOW)·Q3 2025 Earnings Summary

Executive Summary

  • ServiceNow delivered a clean beat-and-raise quarter: total revenue $3.407B (+22% y/y), subscription revenue $3.299B (+21.5% y/y), non-GAAP op margin 33.5% (300 bps above guide), and non-GAAP FCF margin 17.5% . Versus S&P Global consensus, revenue beat by ~$50M and non-GAAP diluted EPS ($4.82) beat by ~13% (vs $4.27).
    Actuals: ; Consensus    : GetEstimates.
  • FY25 guidance raised: subscription revenue to $12.835–$12.845B (from $12.775–$12.795B), non-GAAP operating margin to 31% (from 30.5%), and non-GAAP FCF margin to 34% (from 32%) . Management cited AI-driven opex efficiencies and demand strength .
  • KPIs strengthened: cRPO $11.35B (+21% y/y), RPO $24.3B (+24% y/y); 103 $1M+ NNACV deals; 553 customers >$5M ACV; renewal rate 97% (98% ex a large federal agency closure) .
  • Stock split catalyst: Board authorized a 5-for-1 stock split, pending shareholder approval at Dec 5 special meeting .
  • Watch Q4 setup: guide embeds U.S. Federal timing risk from the recent government shutdown and procurement timelines; Q4 non-GAAP op margin guided to 30% and cRPO +23% (19% cc) . Management also noted some on-prem dynamics into Q4 .

What Went Well and What Went Wrong

What Went Well

  • Broad beat across topline and profitability: subscription revenue +21.5% y/y, cRPO +21% y/y, non-GAAP op margin 33.5% vs guidance; “Q3 was an exceptional quarter… reinforced our ability to scale with accelerating margin expansion.” .
  • AI momentum ahead of plan: “Our AI products are on pace to exceed a half a billion in ACV this year… excellent progress toward $1B next year,” with 12 Now Assist deals >$1M and AI Assist consumption up 55x since May .
  • Federal and Security strength: U.S. Federal net new ACV growth >30% y/y in Q3; security + risk crossed $1B ACV business; GSA OneGov agreement positioned for broader adoption .

What Went Wrong

  • Q4 timing caution in Federal: “The recent government shutdown may also impact deal timing in the near-term… reflected in our Q4 2025 guidance.” .
  • cRPO optics aided by renewal pull-ins: management acknowledged roughly half of the 250 bps cRPO beat benefited from proactively pulling part of the large Q4 renewal cohort into Q3 .
  • Professional services margin remains low: GAAP professional services gross margin 0.5%; even non-GAAP was 11% (structurally lower vs subscription) .

Financial Results

MetricQ1 2025Q2 2025Q3 2025
Total Revenue ($B)$3.088 $3.215 $3.407
Total Revenue YoY Growth18.5% 22.5% 22.0%
Subscription Revenue ($B)$3.005 $3.113 $3.299
Subscription Rev YoY Growth19.0% 22.5% 21.5%
GAAP Diluted EPS ($)$2.20 $1.84 $2.40
Non‑GAAP Diluted EPS ($)$4.04 $4.09 $4.82
Non‑GAAP Operating Margin %31.0% 29.5% 33.5%
Non‑GAAP Gross Margin %82.0% 81.0% 81.0%
Non‑GAAP Free Cash Flow ($B)$1.477 $0.535 $0.592
Non‑GAAP FCF Margin %48.0% 16.5% 17.5%

Q3 vs S&P Global consensus

  • Revenue: $3.407B actual vs $3.357B consensus* → beat by ~$50M. Actual: ; Consensus*: GetEstimates
  • Non‑GAAP Diluted EPS: $4.82 actual vs $4.27 consensus* → beat by ~$0.55. Actual: ; Consensus*: GetEstimates
    Values marked with * are retrieved from S&P Global.

Revenue breakdown (GAAP)

Revenue Type ($M)Q1 2025Q2 2025Q3 2025
Subscription$3,005 $3,113 $3,299
Professional Services & Other$83 $102 $108
Total$3,088 $3,215 $3,407

Key KPIs

KPIQ1 2025Q2 2025Q3 2025
cRPO ($B)$10.31 $10.92 $11.35
RPO ($B)$22.1 $23.9 $24.3
$1M+ NNACV Deals72 89 103
Customers >$5M ACV508 528 553
Renewal Rate98% 98% 97% (98% ex one federal agency)

Guidance Changes

MetricPeriodPrevious GuidanceCurrent GuidanceChange
Subscription Revenue ($B)FY 2025$12.775–$12.795 $12.835–$12.845 Raised
Non‑GAAP Operating Margin %FY 202530.5% 31% Raised
Non‑GAAP Free Cash Flow Margin %FY 202532% 34% Raised
Subscription Gross Margin % (non‑GAAP)FY 202583.5% 83.5% Maintained
Weighted Avg Diluted Shares (M)FY 2025210 210 Maintained
Subscription Revenue ($B)Q4 2025n/a$3.420–$3.430 New
cRPO Growth (y/y)Q4 2025n/a23% (19% cc) New
Non‑GAAP Operating Margin %Q4 2025n/a30% New
Shares (M, diluted)Q4 2025n/a210 New

Management noted Q4 guide prudently reflects potential U.S. Federal deal timing delays due to the recent shutdown and procurement cycles .

Earnings Call Themes & Trends

TopicQ1 2025 (Prior 2Q)Q2 2025 (Prior Q)Q3 2025 (Current)Trend
AI/Now Assist & AgentsPro Plus deals >4x y/y; Now Assist beat; internal AI drove opex efficiency; set $1B ACV by 2026 Now Assist: largest deal >$20M; 21 deals with 5+ Now Assist; Control Tower beating FY targets early On pace to exceed $500M AI ACV in 2025; 12 $1M+ Now Assist deals; 55x assist consumption since May Accelerating momentum
U.S. Federal/Public SectorFed NNACV +30% y/y; strong demand; cautious full-year prudence Executed well; prudence built into guide; six new Fed logos Great Q3; NNACV >30%; Q4 timing caution from shutdown; OneGov simplifies adoption Strong demand; near-term timing risk
CRM push (CPQ, Sales/Service)Announced Logik.ai (CPQ) to reimagine CRM workflows CPQ closed 9 deals in June; CRM in 17 of top-20 deals CRM traction with displacement wins; multiple $1M+ deals; CPQ as entry point Expanding
Data & Platform (RaptorDB, Workflow Data Fabric)RaptorDB Pro 5 $1M+ deals; platform-first AI Workflow Data Fabric in 17 of top-20 deals; RaptorDB traction Workflow Data Fabric and RaptorDB “ahead of plan” Growing adoption
Security & RiskIntegrations and risk/compliance positioning SecOps/Risk NNACV >2x q/q Security+Risk now $1B ACV; AI Control Tower pulling security into deals Scaling
Margins/AI efficienciesNon‑GAAP op margin 31%; AI opex efficiencies highlighted 29.5% beat; AI efficiencies cited 33.5% beat; FY op margin raised to 31% on AI efficiencies Improving

Management Commentary

  • “This outstanding Q3 performance is the clearest demonstration yet that ServiceNow is the AI platform for business transformation… From autonomous workflows to AI-driven CRM, ServiceNow is putting AI to work for people.” — Bill McDermott, CEO .
  • “Now Assist, U.S. Federal, Workflow Data Fabric, and RaptorDB were all ahead of plan… Massive platform demand, combined with AI-driven efficiencies… reinforced our ability to scale with accelerating margin expansion.” — Gina Mastantuono, CFO .
  • “Our AI products are on pace to exceed a half a billion in ACV this year… We saw 12 Now Assist deals over $1 million… AI agent assist consumption has increased over 55x since May.” — Bill McDermott .
  • “We are raising our full‑year operating margin target by 50 bps to 31%… and free cash flow margin by 200 bps to 34%.” — Gina Mastantuono .
  • “The GSA OneGov agreement opens the door for broader federal and government adoption… estimated to boost efficiency by 30%.” — Bill McDermott .

Q&A Highlights

  • AI consumption and monetization: Assist usage up 55x since May; $500M AI ACV in 2025 tracking ahead; hybrid subscription+token model well received, enabling flexibility and predictability .
  • Federal timing and prudence: Guide embeds incremental prudence due to shutdown and procurement timelines; demand remains strong with >30% y/y NNACV growth in Q3 federal .
  • cRPO dynamics: About half of the 250 bps cRPO beat related to proactively pulling part of the large Q4 renewal cohort into Q3, providing momentum into Q4 .
  • CRM/CPQ expansion: Multiple $1M+ CRM deals and displacement wins; CPQ emerging as a powerful entry point to front-office transformation .
  • Security & Risk scale: Business crossed $1B ACV, aided by AI Control Tower pulling security into more conversations; strong adoption and interest from CISOs .

Estimates Context

  • Q3 2025 performance vs S&P Global consensus: Revenue $3.407B vs $3.357B* (beat); non‑GAAP diluted EPS $4.82 vs $4.27* (beat). Actuals: . Consensus*: GetEstimates.
    Values marked with * are retrieved from S&P Global.
  • Forward look (consensus): Q4 2025 revenue $3.527B* and EPS $4.41* vs company Q4 guide of $3.420–$3.430B subscription revenue and 30% non‑GAAP operating margin; potential for estimate tweaks given federal timing cautions and FY25 margin raise . Q4 consensus*: GetEstimates.

Key Takeaways for Investors

  • ServiceNow remains a high-quality beat-and-raise story with accelerating AI monetization: Q3 beat on revenue and EPS, FY25 raised across revenue, operating margin, and FCF margin . Near-term catalysts include continued AI ACV traction and visibility from raised full-year margins.
  • AI is now materially contributing to demand and efficiency: $500M+ AI ACV in 2025, 12 $1M+ AI deals, and internal AI efficiencies supporting margin expansion; this underpins medium-term operating leverage .
  • Federal exposure is a watch item for Q4: Guidance prudently embeds shutdown/procurement-related timing; any faster normalization could provide upside; OneGov should support medium-term adoption .
  • KPI trajectory is healthy: cRPO and RPO grew >20% y/y; large-deal activity and $5M+ customer cohort continue to expand, supporting durable growth .
  • Stock split pending: Five-for-one split subject to Dec 5 shareholder approval; could broaden retail/employee ownership and improve trading liquidity near-term .
  • CRM disruption optionality: CPQ and AI-driven service workflows are gaining traction with displacement wins; strengthens multi-vector growth beyond core IT workflows .
  • Expect estimate revisions: Q3 beats and FY25 raises, coupled with a robust AI narrative and operating leverage, should drive upward estimate/target recalibration, tempered by Q4 federal timing risk. Consensus references*: GetEstimates.

Values marked with * are retrieved from S&P Global.