NOW Q1 Earnings Beat Estimates, Revenues Rise Y/Y, Shares Gain

Core Insights - ServiceNow reported Q1 2025 adjusted earnings of $4.04 per share, beating the Zacks Consensus Estimate by 6.60% and increasing 18.5% year over year [1] - Revenues reached $3.09 billion, surpassing the consensus mark by 0.18% and increasing 18.6% year over year; at constant currency, revenues increased 19.5% to $3.12 billion [1] Financial Performance - Subscription revenues improved 19.1% year over year to $3.01 billion; on a constant currency basis, revenues increased 20% to $3.03 billion [2] - Professional services and other revenues increased 4.5% year over year to $83 million; on a constant currency basis, revenues rose 6% to $84 million [3] - Current remaining performance obligations were $10.31 billion, up 22% year over year on a constant currency basis [3] Customer Growth - ServiceNow had 72 transactions exceeding $1 million in net new annual contract value (ACV) during Q1 [4] - The company expanded its customer base, reaching 508 customers with over $5 million in ACV, representing a 20% year-over-year growth [4] Operating Metrics - Non-GAAP gross margin was 82%, down 150 basis points year over year; subscription gross margin was 84.5%, contracting 100 basis points [5] - Operating expenses as a percentage of revenues decreased 300 basis points year over year to 64.3% [5] - Non-GAAP operating margin expanded 50 basis points year over year to 30.9% [5] Strategic Initiatives - ServiceNow partnered with Vodafone Business to launch AI-powered service management solutions aimed at enhancing customer service [6] - A new partnership with Aptiv focuses on integrating ServiceNow's AI platform with edge intelligence to improve automation across various sectors [7] - The acquisition of Logik.ai is expected to enhance ServiceNow's CRM offerings by integrating advanced AI capabilities [8] Balance Sheet and Cash Flow - As of March 31, 2025, ServiceNow had cash and cash equivalents of $6.60 billion, up from $5.76 billion at the end of 2024 [9] - Free cash flow for the reported quarter was $1.48 billion, an increase from $1.40 billion in the prior quarter [9] Guidance - For 2025, ServiceNow expects subscription revenues between $12.640 billion and $12.680 billion, indicating an 18.5-19% rise from 2024 [10] - Q2 2025 subscription revenues are projected between $3.030 billion and $3.035 billion, suggesting a year-over-year improvement of 19-19.5% [11]