Key Takeaways ServiceNow's subscription revenues rose 21% over the nine months of 2025 from the year-ago period.NOW lifted its 2025 subscription revenue outlook to $12.835 - $12.845B, up about 20% year over year.Partnerships with NVIDIA and others expand AI workflow capabilities despite macro and valuation challenges. ServiceNow’s (NOW) subscription revenues have been benefiting from growing demand for its workflows. Subscription revenues, which account for roughly 97% of the company’s total revenues, have ...

Core Insights - The article highlights the strong demand for AI services, particularly from ServiceNow, which has integrated generative AI into its software suite, driving significant stock performance and investor interest [1][4][12] Company Performance - ServiceNow announced a 5-for-1 stock split following a 1,000% increase in share price over the last decade, marking its first split since the IPO in 2012 [3][10] - The company aims to exceed its initial goal of $500 million in net new annual contract value (ACV) for its Now Assist suite, with expectations to reach $1 billion in ACV by 2026 [5] - The AI Control Tower's deal volume quadrupled year over year in Q3, indicating strong growth potential for the platform [6] Financial Metrics - ServiceNow's market capitalization stands at $179 billion, with a current share price of $861.87 and a gross margin of 78.05% [9] - Revenue grew by 20.5% year over year in Q3, with a projected growth of 19.5% for Q4, alongside an expected operating margin expansion of 150 basis points for the full year [13][15] Customer Engagement - The company has successfully implemented a land-and-expand strategy, leading to high customer retention rates of around 98% and significant increases in customer spending over time [8][9] - Customers who joined in 2016 or earlier have doubled their spending, while the 2025 cohort has increased their initial ACV by 45%, reflecting the strength of ServiceNow's AI services [9] Market Outlook - Despite a high forward PE ratio of 51 and a price-to-sales ratio of 14, ServiceNow is positioned for continued revenue and earnings growth in the 20% range, justifying its high valuation [15]

Key Points ServiceNow recently announced plans for a five-for-one stock split. The software company's AI products are growing at a much faster rate than its overall business. Despite a recent pullback in the stock price, shares remain pricey. 10 stocks we like better than ServiceNow › ServiceNow (NYSE: NOW) is the latest AI (artificial intelligence) stock to announce a stock split. It comes on the heels of impressive business performance as AI helps boost results. The tech company is seeing visibl ...

Core Insights - ServiceNow reported a significant increase in usage of its Now Assist platform, with a 55-fold growth since May, indicating strong demand and potential for monetization in upcoming quarters [1][8][10] - The company is on track to exceed $500 million in Annual Contract Value (ACV) for Now Assist by year-end, ahead of previous expectations, and is aiming for a $1 billion target next year [1][12][23] - The revenue for Q3 2025 reached $3.407 billion, a year-over-year increase of 21.81%, with net profit at $502 million, up 16.20% [2][6] Financial Performance - Q3 2025 revenue was $3.407 billion, representing a 21.81% year-over-year growth [2] - Net profit for the same quarter was $502 million, reflecting a 16.20% increase year-over-year [2] - Basic EPS for Q3 was $2.42, up 15.79% year-over-year [2] Product Development and Market Strategy - The company has integrated AI capabilities into over 100 prepackaged workflows, allowing customers to quickly adopt and implement these solutions [4][5] - ServiceNow's AI Control Tower is becoming a core offering, addressing customer needs for governance and compliance in AI deployment [16][24] - The company is focusing on industry-specific solutions, tailoring offerings to sectors like healthcare, finance, and retail, enhancing customer engagement and satisfaction [14][15] Customer Engagement and Adoption - Currently, 1,700 customers are utilizing Now Assist, with daily increases in adoption [2][10] - The company has observed a shift in customer behavior, with clients moving away from pilot projects to fully integrated solutions, indicating a growing trust in ServiceNow's platform [10][12] - Notable customer success stories include Lenovo and Bell Canada, showcasing significant improvements in operational efficiency and customer satisfaction through the use of Now Assist [11][18] Future Outlook - The company anticipates continued strong demand in the federal sector, with a net new ACV growth of over 30% year-over-year [6][13] - ServiceNow is confident in its ability to maintain a robust growth trajectory, supported by its AI capabilities and industry-specific solutions [26][27] - The company is committed to investing in its AI initiatives, which are expected to drive further operational efficiencies and profit margin expansion [26][27]

Core Viewpoint - ServiceNow's stock has experienced a decline of 12.8% in 2025, contrasting with a 22% rise in the Nasdaq, raising questions about potential buying opportunities for investors despite macroeconomic concerns and high valuations [2][3]. Financial Performance - ServiceNow reported third-quarter 2025 revenue of $3.41 billion, a 22% increase year-over-year, exceeding London Stock Exchange Group estimates by $60 million [6]. - Subscription revenues for Q3 reached $3.3 billion, surpassing StreetAccount estimates by $40 million [6]. - Adjusted earnings per share for Q3 were $4.82, exceeding LSEG consensus by 5 cents [6]. - Net income for Q3 was $502 million, reflecting a 16% increase from the previous year [6]. - Current remaining performance obligations stood at $11.35 billion, up 20.5% year-over-year, and $260 million above analyst forecasts [6]. - Full-year revenue guidance for 2025 is set at $12.845 billion, a $60 million increase from the previous quarter's guidance [6]. Growth Drivers - The AI boom has significantly contributed to ServiceNow's performance, with expectations for AI platform revenue to exceed $500 million in 2025 and on track to meet a 2026 goal of $1 billion [7]. - The company has seen strong growth in government contracts, with U.S. federal business growing over 30% in Q3 [11]. - ServiceNow's AI Control Tower is helping clients achieve returns on their AI investments, enhancing operational efficiency [12][13]. Stock Split and Market Position - ServiceNow announced a 5-for-1 stock split, aimed at making shares more affordable for retail investors, potentially increasing demand [5][15]. - The company is optimistic about attracting consumer investors interested in its AI momentum [16]. Valuation Concerns - Analysts suggest that ServiceNow's stock may be overvalued, trading at a forward price/earnings ratio of 54.69, significantly higher than the sector median of 25.22 [17]. - Competition from major players like Microsoft, Oracle, and Salesforce poses challenges, particularly if price sensitivity among buyers increases [18]. Analyst Sentiment - Despite concerns, analysts see considerable upside potential for ServiceNow's stock, with an average price target of $1,124.82, implying a potential rise of 22% [19].

Core Insights - ServiceNow (NOW) reported third-quarter 2025 adjusted earnings of $4.82 per share, exceeding the Zacks Consensus Estimate by 14.49% and reflecting a year-over-year increase of 29.6% [1][9] - Revenues reached $3.41 billion, surpassing the consensus mark by 1.66% and showing a year-over-year growth of 21.7% [1][9] Revenue Breakdown - Subscription revenues improved by 21.5% year over year to $3.3 billion, with a constant currency increase of 20.5% to $3.27 billion [2] - Professional services and other revenues rose by 31% year over year to $108 million, with a constant currency increase of 29.5% to $107 million [2] Performance Obligations - Current remaining performance obligations (cRPO) stood at $11.35 billion, up 21% year over year, and 20.5% on a constant currency basis [3] - Remaining performance obligations increased by 23% year over year to $24.3 billion on a constant currency basis [3] Client Expansion - ServiceNow secured 103 transactions over $1 million in net new annual contract value (ACV) during the third quarter, with 6 transactions exceeding $10 million [4] - The company expanded its customer base, reaching 553 customers with more than $5 million in ACV, and saw a greater than 20% increase in customers contributing $50 million or more year over year [4] Deal Highlights - Technology workflows accounted for 50 deals over $1 million, with significant contributions from ITSM, ITOM, ITAM, security, risk, CRM, and industry workflows [5] - Net new ACV in transportation and logistics industries grew over 90% year over year, with more than 50% growth in retail, hospitality, and education sectors [6] Operating Metrics - Non-GAAP gross margin was 80.9%, down 160 basis points year over year, while subscription gross margin was 83.2%, contracting 170 basis points [7] - Operating expenses as a percentage of revenues decreased by 360 basis points year over year to 60.5% [7] Profitability - Non-GAAP operating margin expanded by 230 basis points year over year to 33.5% [8] - Free cash flow rose to $592 million, with a free cash flow margin of 17.5%, up 50 basis points year over year [11] Balance Sheet - As of September 30, 2025, cash and cash equivalents and marketable securities totaled $5.41 billion, down from $6.13 billion as of June 30, 2025 [10] - Cash from operations was $813 million, compared to $716 million in the previous quarter [10] Future Guidance - For 2025, ServiceNow expects subscription revenues to be between $12.835 billion and $12.845 billion, indicating a 20.5% rise from 2024 [12] - The company anticipates non-GAAP subscription gross margin of 83.5% and non-GAAP operating margin of 31% for 2025 [12] - For Q4 2025, subscription revenues are projected between $3.42 billion and $3.43 billion, suggesting year-over-year growth of 19.5% [13]

Financial Data and Key Metrics Changes - Subscription revenue for Q3 2025 was $3.299 billion, growing 20.5% year over year in constant currency, exceeding guidance by 100 basis points [20] - Remaining performance obligations (RPO) ended at approximately $24.3 billion, representing 23% year over year constant currency growth [20] - Current RPO was $11.35 billion, reflecting 20.5% year over year constant currency growth, beating guidance by 250 basis points [20] - Non-GAAP operating margin was 33.5%, 300 basis points above guidance, driven by top-line outperformance and operational efficiencies [23] - Free cash flow margin was 17.5%, up 50 basis points year over year [23] Business Line Data and Key Metrics Changes - Now Assist had 12 deals over $1 million in net new ACV, including one over $10 million, indicating strong performance [22] - IT Service Management (ITSM) and HR Plus net new ACV doubled quarter over quarter, while IT Operations Management (ITOM) Plus net new ACV surged more than 5x quarter over quarter [22] - Customer Service Management (CSM) Plus deal volume tripled year over year [22] Market Data and Key Metrics Changes - The transportation and logistics sector led growth with over 90% year over year increase in net new ACV, followed by retail, hospitality, and education sectors, both growing over 50% [21] - The U.S. Federal business grew net new ACV over 30% year over year, showcasing strong demand in the government sector [21] Company Strategy and Development Direction - The company is focusing on AI business transformation, with a target of exceeding $1 billion in AI products ACV by 2026 [7][22] - ServiceNow is positioning itself as a leader in enterprise AI, integrating various technologies to provide comprehensive solutions [10][19] - The company is raising guidance for Q4 and full-year 2025, reflecting confidence in its growth trajectory and market opportunities [7][24] Management's Comments on Operating Environment and Future Outlook - Management expressed strong confidence in the future, highlighting the significant market opportunity for the platform and the ongoing demand for AI solutions [6][7] - The company acknowledged potential impacts from the ongoing government shutdown on deal timing in the U.S. Federal business for Q4 [26] Other Important Information - The Board of Directors approved a five-for-one stock split to make shares more accessible to a broader base of investors [24] - The company ended Q3 with $9.7 billion in cash and investments, indicating a robust balance sheet [23] Q&A Session Summary Question: Integration and Implementation of Agentic Technology - Bill McDermott discussed the importance of integration expertise and the role of external partners in successfully implementing agentic technology [30][31] Question: Broader Sales Organization and AI Solutions - Amit Zavery confirmed that the sales organization is becoming more adept at selling AI solutions, with a growing number of customers live on the platform [41] Question: Federal Government Shutdown Impact - Gina Mastantuono explained that while demand remains strong, the government shutdown has led to a more prudent approach in guidance [45][46] Question: Demand Trends and AI Consumption - Bill McDermott highlighted strong demand trends and the significant growth in AI consumption, particularly in the context of customer engagement [50][51] Question: MoveWorks Acquisition Update - Gina Mastantuono provided an update on the expected closing of the MoveWorks deal, emphasizing that current successes are independent of this acquisition [75] Question: AI Control Tower Demand - Amit Zavery noted that the AI Control Tower is gaining significant interest from customers concerned about managing AI security and compliance [80]

Financial Data and Key Metrics Changes - Subscription revenue for Q3 2025 was $3.299 billion, growing 20.5% year over year in constant currency, exceeding guidance by 100 basis points [20] - Remaining Performance Obligations (RPO) ended at approximately $24.3 billion, representing 23% year over year constant currency growth [20] - Current RPO was $11.35 billion, reflecting 20.5% year over year constant currency growth, beating guidance by 250 basis points [20] - Non-GAAP operating margin was 33.5%, 300 basis points above guidance, driven by top-line outperformance and operational efficiencies [23] - Free cash flow margin was 17.5%, up 50 basis points year over year [23] Business Line Data and Key Metrics Changes - Now Assist had 12 deals over $1 million in net new ACV, including one over $10 million, indicating strong performance [22] - IT Service Management (ITSM) and HR Plus net new ACV doubled quarter over quarter, while IT Operations Management (ITOM) Plus net new ACV surged more than 5x quarter over quarter [22] - Customer Service Management (CSM) Plus deal volume tripled year over year [22] Market Data and Key Metrics Changes - The transportation and logistics sector led growth with over 90% year over year increase in net new ACV, followed by retail, hospitality, and education sectors, both growing over 50% [21] - The U.S. Federal business grew net new ACV over 30% year over year, demonstrating strong demand [21] Company Strategy and Development Direction - The company is focused on AI business transformation, with a target of exceeding $1 billion in AI products ACV by 2026 [7][22] - ServiceNow aims to integrate AI into enterprise workflows, emphasizing the importance of governance and management of AI technologies [8][10] - The company is raising guidance for Q4 and full-year 2025, reflecting confidence in market opportunities and operational execution [7][24] Management's Comments on Operating Environment and Future Outlook - Management expressed strong confidence in the future, highlighting the significant market opportunity for the ServiceNow platform [6][7] - The ongoing government shutdown may impact deal timing in the U.S. federal business, but demand remains strong [26][45] - The company is optimistic about the trajectory of its business, with a robust pipeline heading into Q4 [53] Other Important Information - The Board of Directors approved a five-for-one stock split to make shares more accessible to a broader base of investors [24] - The company ended Q3 with $9.7 billion in cash and investments, indicating a strong balance sheet [23] Q&A Session Summary Question: Integration and Implementation of Agentic Technology - Bill McDermott discussed the importance of integration expertise and the role of external partners in implementing agentic technology [30][31] Question: Broader Sales Organization and AI Solutions - Amit Zavery confirmed that the sales organization is becoming more adept at selling AI solutions, with a growing number of customers live on the platform [41] Question: Federal Government Impact on Guidance - Gina Mastantuono explained that the company has factored in prudence regarding the federal government shutdown, affecting deal timing [45][46] Question: Demand Trends and AI Consumption - Bill McDermott noted that demand is stronger than ever, with significant growth in AI consumption and utilization [50][51] Question: MoveWorks Acquisition Update - Gina Mastantuono indicated that the MoveWorks deal is expected to close towards the end of Q4, enhancing ServiceNow's AI capabilities [75] Question: AI Control Tower Demand - Amit Zavery highlighted the strong interest in the AI Control Tower, which addresses customer concerns about managing AI technologies [80]

Financial Data and Key Metrics Changes - Subscription revenue for Q3 2025 was $3.299 billion, growing 20.5% year over year in constant currency, exceeding guidance by 100 basis points [19] - Remaining performance obligations (RPO) ended at approximately $24.3 billion, representing 23% year over year constant currency growth [19] - Current RPO was $11.35 billion, reflecting 20.5% year over year constant currency growth, beating guidance by 250 basis points [19] - Non-GAAP operating margin was 33.5%, 300 basis points above guidance, driven by top-line outperformance and operational efficiencies [22] - Free cash flow margin was 17.5%, up 50 basis points year over year [22] Business Line Data and Key Metrics Changes - Now Assist had 12 deals over $1 million in net new ACV, including one over $10 million, indicating strong performance in AI products [21] - IT Service Management and HR Plus net new ACV doubled quarter over quarter, while IT Operations Management Plus surged more than 5x quarter over quarter [21] - Customer Service Management Plus deal volume tripled year over year, showcasing significant growth in CRM solutions [21] Market Data and Key Metrics Changes - Transportation and logistics led the way with over 90% year over year growth in net new ACV, followed by retail, hospitality, and education, both growing over 50% [20] - U.S. Federal business grew net new ACV over 30% year over year, demonstrating strong demand in the government sector [20] Company Strategy and Development Direction - The company is focusing on AI business transformation, with a target of exceeding $1 billion in AI products ACV by 2026 [6][21] - The introduction of the AI Control Tower aims to provide governance and management for AI initiatives, addressing customer concerns about security and compliance [76][79] - The company is enhancing its platform with industry-specific solutions, leveraging partnerships to build tailored offerings for sectors like financial services and retail [67][68] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the future, raising guidance for Q4 and full-year 2025 based on strong Q3 performance [4][24] - The ongoing government shutdown may impact deal timing in the U.S. federal business, but demand remains strong [24][42] - The company is experiencing a cultural shift towards AI adoption internally, enhancing operational efficiencies and employee satisfaction [39] Other Important Information - The Board of Directors approved a five-for-one stock split to make shares more accessible to a broader base of investors [23] - The company ended Q3 with $9.7 billion in cash and investments, indicating a robust financial position [22] Q&A Session Summary Question: Integration and implementation of agentic technology - Management acknowledged the need for integration expertise and mentioned plans to invest in forward-deployed engineers to assist customers [28][33] Question: Broader sales organization and partner base for AI solutions - Management confirmed that the sales organization is becoming more adept at selling AI solutions, with a significant increase in customer assists [37][38] Question: Impact of government shutdown on guidance - Management noted that while demand remains strong, they have factored in prudence regarding the timing of federal deals due to the shutdown [41][42] Question: Consumption trends and AI credits - Management highlighted a 55x growth in assists since May, indicating strong customer engagement and usage of AI solutions [52][58] Question: Demand for AI Control Tower - Management reported a 4x growth in customer interest for the AI Control Tower, emphasizing its importance for managing AI initiatives [76][79]

Core Thesis - ServiceNow, Inc. is experiencing strong momentum with a balance of high growth and margin pressures related to AI and data center investments [2][5] - The stock was trading at $933.37 as of September 24th, with trailing and forward P/E ratios of 117.41 and 46.30 respectively [1] Financial Performance - The company reported a 22.4% year-over-year revenue growth in Q2, with remaining performance obligations (RPO) increasing by 28.5% and current RPO (cRPO) up by 24.4% [2] - Subscription revenue, which constitutes 96.8% of total sales, accelerated to a 22.5% year-over-year growth [2] - Gross margins decreased from 82.6% to 81.0%, while operating margin improved to 29.7% and free cash flow margin reached 16.6% [2] Valuation and Market Position - ServiceNow's forward EV/Sales multiple stands at 13.3 and P/E at 51.1, which are considered elevated compared to peers, yet justified by sustained revenue growth exceeding 20% and a renewal rate of 98% [3] - The company has established a competitive advantage through high switching costs, deep integrations across various workflows, strong brand equity, and expanding economies of scale [3] Customer Base and Recognition - ServiceNow has a growing base of large clients, with 528 customers paying more than $5 million in annual contract value (ACV) and over 30% year-over-year growth in customers with ACV above $20 million [3] - Notable clients include ExxonMobil, Standard Chartered, Merck, Starbucks, and NVIDIA, leveraging ServiceNow's AI Control Tower and automation capabilities [4] - The company has been recognized as a leader in Gartner's 2025 Magic Quadrants across IT service management, low-code, and AI-enabled applications [4] Financial Health - ServiceNow holds strong cash reserves of $6.1 billion against $2.3 billion in debt, positioning the company well for future growth [4]