Executive Summary

Q4 2024 delivered 21% YoY subscription revenue growth to $2.87B and total revenue of $2.96B, with cRPO up 19% (22% cc) to $10.27B and RPO up 23% (26% cc) to $22.3B .
Profitability remained strong: non-GAAP operating margin was 29.5% and free cash flow margin 47.5%, with non-GAAP diluted EPS of $3.67; GAAP diluted EPS was $1.83 .
2025 guidance introduced: subscription revenue $12.64–$12.68B (+18.5–19% GAAP; +19.5–20% cc), non-GAAP subscription gross margin 83.5%, operating margin 30.5%, and FCF margin 32%; Q1’25 subscription revenue guided to $2.995–$3.000B with cRPO +20.5% cc, incorporating FX headwinds and U.S. Federal seasonality .
Strategic catalyst: launch of agentic AI “AI Agent Orchestrator,” thousands of pre-built agents, and AI Agent Studio (included in Pro Plus/Enterprise Plus in March 2025), plus hybrid consumption monetization tied to AI usage—poised to drive adoption and future usage-based upside .

What Went Well and What Went Wrong

What Went Well

Durable growth and large-deal momentum: Q4 subscription revenue +21% YoY; 19 deals >$5M NNACV and 3 deals >$20M; 2 additional customers crossed $100M total ACV; nearly 500 customers now >$5M ACV .
AI traction accelerated: Now Assist service desk deals grew >150% QoQ, Plus SKUs kept >30% price uplift vs Pro, and customers buying ≥2 GenAI capabilities doubled QoQ; early RaptorDB Pro traction (>5 customers >$1M ACV, up to 3.5x faster response) .
Profitability and cash generation: non-GAAP operating margin 29.5% and free cash flow margin 47.5% in Q4; FY24 FCF of $3.5B and margin 31.5% (50 bps above prior guide), plus authorization of an additional $3B buyback .

What Went Wrong

FX headwinds and mix weigh on growth optics: management quantified new FX headwinds of ~$175M to 2025 subscription revenue and ~$205M to Q1’25 cRPO; Q4 non-GAAP FCF margin was 47.5%, down YoY from 55% .
PS margin remains modest: professional services and other non-GAAP gross margin was 8.5% in Q4 (GAAP -4%), underscoring services drag vs subscription .
Transition complexity for consumption: shift to hybrid consumption/subscription for AI agents could delay immediate subscription uplift, with monetization expected to build as usage ramps; management prudently embedded this in the 2025 outlook .

Financial Results

Headline P&L and Cash Flow (GAAP and non-GAAP where disclosed)

Metric	Q2 2024	Q3 2024	Q4 2024
Total Revenues ($M)	$2,627	$2,797	$2,957
Subscription Revenues ($M)	$2,542	$2,715	$2,866
GAAP Diluted EPS ($)	$1.26	$2.07	$1.83
Non-GAAP Diluted EPS ($)	$3.13	$3.72	$3.67
Non-GAAP Operating Margin (%)	27.0%	31.0%	29.5%
Non-GAAP FCF ($M)	$359	$471	$1,400
Non-GAAP FCF Margin (%)	14.0%	17.0%	47.5%

Revenue Mix

Metric	Q2 2024	Q3 2024	Q4 2024
Subscription Revenues ($M)	$2,542	$2,715	$2,866
Professional Services & Other ($M)	$85	$82	$91

KPIs and Bookings

KPI	Q2 2024	Q3 2024	Q4 2024
cRPO ($B)	$8.78	$9.36	$10.27
cRPO YoY (cc)	22.5%	23.5%	22%
RPO ($B)	$18.6	$19.5	$22.3
Customers >$1M ACV (#)	1,988	2,020	2,109
Renewal Rate	98%	98%	98%

Margins (Q4 2024 detail)

Metric	GAAP	Non-GAAP
Subscription Gross Margin	81%	84.5%
Professional Services & Other Gross Margin	-4%	8.5%
Total Gross Margin	79%	82%
Operating Margin	13%	29.5%

Note: Q4 YoY subscription revenue growth +21%; cRPO +19% (22% cc), RPO +23% (26% cc) .

Guidance Changes

Metric	Period	Previous Guidance	Current Guidance	Change
Subscription Revenues ($M)	Q1 2025	—	$2,995–$3,000; +18.5–19% GAAP; +19.5–20% cc	New
cRPO Growth	Q1 2025	—	+19.5% GAAP; +20.5% cc	New
Non-GAAP Operating Margin	Q1 2025	—	30%	New
Diluted Shares (GAAP, M)	Q1 2025	—	210	New
Subscription Revenues ($M)	FY 2025	—	$12,635–$12,675; +18.5–19% GAAP; +19.5–20% cc	New
Non-GAAP Sub. Gross Margin	FY 2025	—	83.5%	New
Non-GAAP Operating Margin	FY 2025	—	30.5%	New
Non-GAAP FCF Margin	FY 2025	—	32%	New
Diluted Shares (GAAP, M)	FY 2025	—	210	New
Q4’24 Sub. Revenue vs Prior Guide	Q4 2024	$2,875–$2,880 (10/23/24)	Actual $2,866; slide bridges prior midpoint 2,878 → actual 2,866 (FX -$7M)	Slight under midpoint due to FX

Context: Management embedded ~$175M 2025 FX headwind (incl. $40M in Q1’25) and ~$205M FX headwind to Q1’25 cRPO; also assumed more back-half weighted U.S. Federal linearity due to administration change .

Earnings Call Themes & Trends

Topic	Previous Mentions (Q2 & Q3)	Current Period (Q4)	Trend
Agentic AI / Now Assist	Q2: NNACV for Now Assist doubled QoQ; BYO model; Knowledge event pipeline +50% YoY . Q3: Announced Workflow Data Fabric, AI Agents roadmap; Xanadu release .	Now Assist service desk deals +150% QoQ; Plus SKUs >30% uplift; AI Agent Orchestrator, thousands of pre‑built agents, AI Agent Studio announced; hybrid consumption model for agents .	Acceleration; formal productization and monetization model shift.
Data layer / RaptorDB	Q2: RaptorDB Lighthouse launched .	>5 customers >$1M ACV; up to 3.5x faster DB response; 30% DB size reduction; new integrations with Oracle/Google Cloud .	Commercial traction and ecosystem expansion.
Public sector	Q3: Federal/state & local strong; cRPO +26% cc .	Public sector grew ~40% YoY; 2025 guidance assumes back-half weighting in Federal due to administration change .	Robust demand with seasonal risk acknowledged.
FX/Macro	Q2: modest 2024 FX headwind noted .	New $175M 2025 FX headwind; $205M headwind to Q1’25 cRPO; model updated accordingly .	Incremental FX drag.
CRM/Customer & Employee Workflows	Q2/Q3: Expanding partnerships and use cases .	Fastest-growing business; internal “Now on Now” shows 80% case deflection over 6 months, 400k labor hours saved; CRM “sell-fulfill-service” on one platform .	Strengthening product-market fit and proof points.

Management Commentary

CEO framing the setup: “We are one of one, a 20%+ grower at scale with margin accretion… operating at the Rule of 54… on track for our midterm target of $15B+ by 2026” .
AI strategy: “ServiceNow's leadership position in the seismic shift to agentic AI… AI Agent Orchestrator eliminates sprawl, managing teams of AI agents… ServiceNow's role as the CIO's control plane is the ultimate moat in enterprise AI” .
Monetization approach: “We will include AI agents in our Plus SKUs, foregoing upfront incremental new subscriptions to drive faster adoption and monetize increasing usage over time… baseline subscription remains rock solid” .
CFO on 2025 guide: “20% constant currency guide while de-risking… more back-end weighted deal linearity in 2025 for federal… incremental $175M FX headwind since end of September” .

Q&A Highlights

Hybrid subscription + consumption pricing: Management emphasized “Goldilocks” model—predictable seat-based subscriptions plus metered agent consumption as usage scales; optionality for assist “packs” to accelerate adoption and monetization over time .
LLM cost deflation: Falling model costs are a net positive, shifting value capture to the application/platform layer and benefiting margins; platform orchestrates across third‑party models with a responsible AI approach .
Go-to-market optimization: Strength-on-strength model with Pro Plus SKUs bundling agents, broader data fabric (RaptorDB + connectors), and organizational tweaks to drive execution; pursuing both high-value and high-volume motions .
Federal seasonality and guidance philosophy: Guidance prudently embeds FX and U.S. Federal timing risks; without these derisking elements, CFO said growth would be “higher” hypothetically .
Seat growth vs consumption: Clear message that they are not foregoing subscription revenue; AI agent usage is expected to create a “hockey stick” in metered consumption on top of growing subscriptions .

Estimates Context

Wall Street consensus from S&P Global for Q4 2024 and FY 2025 was unavailable at this time due to data access limits; therefore, beat/miss versus consensus is not shown. We will update comparisons once S&P Global data access is restored.
Management did note internal beats vs guidance on constant-currency growth and profitability (e.g., Q4 operating margin and cRPO growth +50 bps above the top end), but this is relative to company guidance, not Street consensus .

Key Takeaways for Investors

Momentum > optics: Subscription revenue +21% YoY in Q4 with strong large-deal activity and 98% renewals; cRPO and RPO growth signal sustained demand into 2025 despite FX .
Structural AI catalyst: Launch of AI Agent Orchestrator and AI Agent Studio (included in Pro Plus/Enterprise Plus in March) plus hybrid consumption pricing should accelerate adoption now and monetize usage over time—an upside lever beyond core seat growth .
Profitability discipline continues: Non-GAAP operating margin at 29.5% in Q4 and 30.5% guided for 2025; FCF margin guided to 32% despite FX and tax headwinds .
Watch FX and Federal timing: 2025 guide prudently bakes in ~$175M FX headwind and back‑half Federal seasonality; intra-year bookings linearity could be more skewed to H2 .
Product expansion beyond IT: Customer & Industry Workflows and RaptorDB data layer are broadening TAM; internal “Now on Now” metrics offer credible proof points for AI’s efficiency impact .
Capital allocation: Additional $3B buyback authorization provides a buffer against dilution and signals confidence in cash generation .
Near-term trading focus: March availability of AI Agents in Plus SKUs, Q1’25 cRPO print vs +20.5% cc guidance, and signs of early consumption ramp are likely stock catalysts .

Additional Relevant Press Releases (Q4 2024 timeframe)

Agentic AI platform announcements: AI Agent Orchestrator and AI Agent Studio unveiled; included in Pro Plus and Enterprise Plus in March 2025 .
Strategic alliances: Expanded with Visa to streamline card dispute resolution (VDMS/DAS) ; Multi‑year partnership with SoftwareOne to optimize software/cloud ROI .

ServiceNow, Inc. (NOW)·Q4 2024 Earnings Summary