NOW Q2 Earnings Beat Estimates, Revenues Rise Y/Y, Shares Rise

Core Insights - ServiceNow (NOW) reported Q2 2025 adjusted earnings of $4.09 per share, exceeding the Zacks Consensus Estimate by 15.54% and reflecting a 30.7% year-over-year increase [1] - Revenues reached $3.22 billion, surpassing the consensus mark by 3.02% and showing a 22.4% year-over-year growth [1] - At constant currency, revenues increased by 21.5% year over year to $3.19 billion [1] Revenue Breakdown - Subscription revenues improved by 22.5% year over year to $3.11 billion, with a 21.5% increase at constant currency to $3.09 billion [2] - Professional services and other revenues rose by 20% year over year to $102 million, with an 18% increase at constant currency to $101 million [2] Performance Obligations - Current remaining performance obligations (cRPO) stood at $10.65 billion, up 21.5% year over year at constant currency [3] - Total remaining performance obligations increased by 25.5% year over year at constant currency to $23.3 billion [3] Customer Growth - ServiceNow secured 89 transactions exceeding $1 million in net new annual contract value (ACV) during Q2 [4] - The company expanded its customer base, reaching 528 customers with over $5 million in ACV, representing a 19.5% year-over-year growth [4] AI Innovations - ServiceNow launched AI Control Tower and AI Agent Fabric, enhancing enterprise transformation through centralized AI governance [5] - The Core Business Suite was introduced, integrating HR, procurement, finance, and legal operations into a single AI-powered platform [6] Strategic Partnerships - Collaborations with AWS and NVIDIA strengthened AI capabilities, with AWS providing bi-directional data integration and NVIDIA introducing the Apriel Nemotron 15B reasoning model [7] - Additional partnerships with UKG and Cisco enhanced workforce management and AI Defense capabilities [7] Financial Metrics - Non-GAAP gross margin was 81%, down 160 basis points year over year, while subscription gross margin was 83.2% [9] - Operating expenses as a percentage of revenues decreased by 350 basis points year over year to 66.3% [10] - Non-GAAP operating margin expanded by 230 basis points year over year to 29.7% [10] Cash Flow and Share Repurchase - As of June 30, 2025, cash and cash equivalents totaled $6.13 billion, down from $6.6 billion at the end of Q1 2025 [11] - Free cash flow for the quarter was $535 million, a decrease from $1.48 billion in the previous quarter [11] - The company repurchased approximately 381,000 shares for $361 million, with $2.6 billion available for future repurchases [12] Guidance - For 2025, ServiceNow expects subscription revenues between $12.775 billion and $12.795 billion, indicating a 20% rise from 2024 [13] - Q3 2025 subscription revenues are projected between $3.26 billion and $3.265 billion, suggesting year-over-year growth of 20%-20.5% [14]